For Mathieu Plane, an economist at the French Observatory of Economic Conjunctures (OFCE), the stimulus plan presented on September 3 by the government lacks short-term measures to boost consumption and business order books.
The government has presented France Relance both as an investment plan and a way to restore the economy by 2022. Isn’t that contradictory?
The Minister of the Economy, Bruno Le Maire, has indicated that he wants to disburse a third of the 100 billion euros in credits of the plan from 2021. According to our calculations, we are almost at 40%. But the entire plan will not be spent by 2022: the hydrogen plan, for example, provides for 7 billion euros of investment in total but only 2 billion in 2021-2022. A big part of the plan will affect the next two years. But it will spread beyond.
What are the main pitfalls?
Many measures are not simple fiscal measures: we will have to feed them, find ways to implement them. Take the thermal renovation of buildings: the ambition is strong (more than 6 billion euros in the plan) but it will be necessary to find the companies, the skills, the workforce to achieve it. Construction is a sector that can be in tension. Will we have succeeded in carrying out renovations worth 6 billion euros in 2022? Making an investment in such a short time, especially so targeted, is difficult.
Excluding investment, is the plan well calibrated to get the country out of the current crisis?
Injecting 30 billion euros more into the economy in 2021 will allow to achieve at least one point of gross domestic product (GDP) of additional activity. But we could have done better. Many measures will have rather long-term effects, such as lowering production taxes. It is a general measure that is aimed at companies regardless of their state of health. This will have medium-term effects on competitiveness, whereas with partial unemployment and the strengthening of companies’ equity, employment is preserved and the productive fabric is strengthened. We can also regret the absence of measures to boost order books.
What other devices would have been necessary?
Personal savings (nearly 100 billion euros) constitute in itself a recovery plan! We could have imagined measures boosting demand in the most affected sectors. For example a temporary VAT cut, not general as in Germany but targeted, as in the United Kingdom, on the sectors most affected by the crisis: restaurants, cafes … This avoids supporting imported purchases and at worst, even s ‘there is no effect on consumption, this gives the sectors concerned room for maneuver.
You have 29.31% of this article to read. The rest is for subscribers only.