Macron weighs on the economy versus politics when the French reopens

When French bars and restaurants reopened last week, the government of President Emmanuel Macron recalled a great moment: how to remove Covid’s stale economy from a livelihood and restore health.

When the pandemic started, Macron ordered “all that is needed”With a wide range of programs to support companies and employees, such as money, loans and financial aid.

But now, as emergency aid begins to dwindle, the president, who is running for re-election in May, must show voters that the French economy can get back on track. Well-known economists and political opponents like Marine Le Pen urge the government to think about the stimulus.

Macron has unveiled the idea of ​​higher state spending this summer, saying it wants to consult extensively with citizens and business leaders to “invent the second phase [economic] re-launch ”- France is already above its € 100 billion recovery plan sent To gain EU approval.

Ministers have also hung up on hopes of getting more money, but the country must wait to see how the economy works under that plan.

Meanwhile, voters have tried to show Macron’s weight on the European stage, France has done began Commit to new EU initiatives to boost investment in the U.S. and China to continue faster growth.

“The question that can be asked is whether we will need a long-term investment plan if we are planning for 2022 … to return to the level of economic activity we had in 2019, can’t we try to do better?” Finance Minister Bruno Le Maire told France Info .

In Brussels, there is little appetite to reopen talks on a 750-billion-euro recovery plan for 27 members: “It’s too early,” said Margrethe Vestager, vice-president of the European Commission. tell Les Echos newspaper.

France will get 40 billion euros from 100 billion euros recovery plan from Europe. And although that EU money is still starting to flow, France has already earmarked € 30 billion for projects.

These are based on three priorities: green investment, such as clean fuel research and renovation of buildings; measures to increase competitiveness, such as factory modernization, and; “Social cohesion,” which includes health and job training.

Difficulties in getting more money agreed in Europe and the fact that Macron and his ministers have downplayed a short-term EU deal have fueled policies that also fuel concerns about the French president stealing the US and China’s march. innovation.

However, it is appropriate to ask whether EU states, such as France, should incur more spending as emergency aid is reduced.

Pointing out US President Joe Biden’s multi-billion dollar spending plans, some economists are calling for direct transfers to low-income families, debt relief to the most affected companies that took out state-backed loans, and greater stimulus.

In one the final roleJean Pisani-Ferry and economist Olivier Blanchard have said that France should increase spending beyond the current planet by 60 billion euros.

“Even if there are scars from this crisis, there are at least some ways to cure them,” said Pisani-Ferry, a former head of France’s economic planning agency, who has advised Macron before.

Macron should not “delay” with measures to cancel debts, he added, because unless enough money is pumped into the economy it can become a low-growth “self-fulfilling prophecy”.

One of the priorities is for the French to spend 165 billion euros on savings saved in the last year. As a result, spending 20% ​​of these savings on food, drink and food could generate an additional 1.7% of GDP. See you, national institute of statistics.

Many restaurants and bars welcomed customers when they reopened to the outside service last Wednesday, after being closed for six months. However, some decided not to reopen, fearing that the kind of temperature reductions at 9pm would not be profitable.

Meanwhile, other businesses are struggling with debts incurred last year, including government backing PGE loan scheme. Commercial groups believe that these businesses should have their loans extended for a period of six years. However, these changes can be costly and banks want to agree.

The owner of a Parisian restaurant, Michelin-starred chef Yannick Alleno, wanted to extend the state-guaranteed loan by 1.5 million euros for a year, but decided against it when his bank said renegotiating it would cost about 50,000 euros in upfront costs. “A lot of restaurants are in debt now,” he said. “We need help to protect the work of our staff.”

Another sensitive issue is whether companies will lay off workers in the coming months as the government reduces support, reducing the provincial scheme that has so far prevented the rise in unemployment.

Pisani-Ferry said that if Macron wants to protect jobs and ensure high consumer confidence, it should open them up.

Going forward, the risks that would be a greater incentive to buy foreign goods and add to public debt outweigh the benefits of faster economic growth, which is already projected to be at least 5.5 percent this year and 4 percent next year. French central bank.

“There are no budget cuts in the short term, but the policy is smooth. . . the government does not want to give the impression of what it can spend without any restrictions, ”said Philippe Martin, chairman of the French Council for Economic Analysis.

Daniela Ordonez, the chief French economist at Oxford Economics, goes further, arguing that Macron has no need for Europe to increase spending: “France can do what it wants.” However, politically, it’s a different story, he said.

With France taking over the EU presidency in 2022 and the elections coming up, “Macron wants to change what Europe wants, to show that Europe has changed under its responsibility.”