French Prime Minister Jean Castex unveiled on Thursday (3 September) a detailed national economic recovery plan amounting to €100 billion over two years. The plan is in line with those drawn up by Berlin and the European Commission, according to the head of the influential French think tank IDDRI.
France’s plan is “massive”, of “historic magnitude”, and appears to be a “giant step” for the environment. The tone has been set and the message is clear: the government is not taking half-measures to revive an economy brought down by the COVID-19 health crisis and is betting on what it calls the “sectors of the future”.
“One hundred billion is almost four times more than the recovery plan implemented to deal with the [financial] crisis of 2008. It is, in proportion to national wealth, the largest stimulus package announced to date in a major European country. Above all, it is the amount of money our economy needs to return to our pre-crisis levels of wealth by 2022,” said Prime Minister Castex.
Dubbed “France Relance”, the plan represents about 9.5% of the country’s GDP, higher than the recovery plans announced by Germany and the UK, which account for 6.9% and 8.6% of their respective GDPs. In absolute terms, however, Berlin had announced a more ambitious plan amounting to €130 billion.
France’s recovery plan includes 70 measures centred around the ecological transition (€30 billion), business competitiveness (€35 billion) and social and territorial cohesion (€35 billion).
Of the €100 billion planned, €40 billion will come from the EU’s recovery plan – but will not be paid out until next summer. But because the economy is expected to shrink by a record 11% this year, the funds will have to be brought forward so it can recover fast.
That is why the government’s aim is to get back to pre-crisis activity levels by 2022 and start cutting unemployment as soon as possible. To this end, the government is banking on an accelerated supply-side policy, i.e. on long-term investments and support for businesses.
But with the next presidential elections coming up in 2022, this detail carries a great deal of political weight.
Alignment between the French, German and European plans
Sébastien Treyer, director-general of the Institute for Sustainable Development and International Relations (IDDRI), said “this plan resonates strongly with the German plan and with that of the European Commission. It is a strong political and economic signal for the continent’s players: an ecological transition is coming”.
In fact, by devoting one third of its recovery plan to ecological transition, Paris is following the line defined by the European Commission.
To this end, the government is giving priority to the energy renovation of buildings, low-carbon mobility and railways, as well as to green hydrogen as a means of decarbonising the industrial sector.
According to Treyer, this strategy puts France “in the same league as Germany.”
Moreover, by developing the green hydrogen sector, France is also signalling its willingness to cooperate with Germany, which has made expanding the sector one of its key priorities in accelerating its transition to a low-carbon economy.
‘The devil is in the details’
But what about the remaining €70 billion, meant for business competitiveness and social and territorial cohesion?
One should be able to check whether the recovery plan will truly benefit the ecological transition, according to Treyer. “Monitoring conditions is one of the key issues, it is one of the battles to be won,” he stressed.
IDDRI’s director also noted that a structured plan is better than a succession of emergency financial aid packages for companies in difficulty, because it gives a lasting signal to all economic players. And on such a basis, it is possible to organise good monitoring of the recovery plan’s environmental and social effectiveness.
“But the devil is in the details and, in this case, in the implementation of the plan. When the pressure to spend a lot becomes strong, it will be necessary to have structured channels: this is particularly necessary for the renovation of buildings, but also for the establishment of protein production in the agricultural sector,” he warned.
To this end, Treyer recommends setting up a monitoring committee, a measure that was not taken in 2008. However, while he believes that monitoring conditions have improved and gained political awareness, they have not yet been announced.
“We do not yet have enough visibility to do this kind of monitoring – how will it be organised? We have not been involved in this particular debate,” he added.