France’s new stimulus plan under fire

3rd February 2009, Comments 0 comments

Opposition Socialist Party dismisses the government's announcements as having little effect.

LYON – French Prime Minister Francois Fillon on Monday unveiled details of a multi-billion-euro stimulus plan, but admitted it would not shield France's economy from recession.

President Nicolas Sarkozy's government is under pressure to show how the 26.5-billion-euro package adopted by parliament last week will cushion ordinary workers from the slowdown.

Some EUR 870 million will be pumped into transport, EUR 730 million into research and universities, EUR 620 million on culture and heritage renovation work, and EUR 1.1 billion used to build and renovate social housing.

The stimulus plan also includes some EUR 1.3 billion in aid and hiring subsidies for small business, as well as EUR 220 million in bonus payments for the scrapping of polluting cars.

Several billion more are spread across dozens of small-scale projects, from energy-efficient farming to boosting security in mental hospitals - with planned investments pulled forward to the period 2009-2010.

Split into three categories, the French stimulus plan includes EUR 11.1 billion of direct state investment and four billion of investment by state-owned energy and transport firms.

Another EUR 11.4 billion will come in the form of treasury facilities to help improve business cashflow.

Sarkozy's specially-appointed "Recovery Minister," Patrick Devedjian, told reporters that EUR 10 billion would be rolled out "starting this week".

But the opposition Socialist Party dismissed the government's announcements as "a load of hot air, with little results".

"The state is simply... dressing up old spending as new," charged Michel Sapin, the Socialist spokesman on economic affairs.

Speaking in Lyon, Fillon admitted the stimulus plan would not be enough to shield the French economy, which the IMF expects to shrink by about 1.9 percent this year.

French unemployment figures jumped by 45,800 in December to 2,110,000 jobless, official figures showed Monday, an 11.4 percent increase over a year.

"France is no exception to a trend that is affecting the whole of the world," Fillon said. "What we hope is that the measures we are now taking will help France to improve its outlook compared to these forecasts."

Finance Minister Christine Lagarde was more explicit. "All the countries of the eurozone will be at about minus two" percent growth this year, she said. "We shouldn't have any illusions."

Lagarde told reporters on the way to Lyon the last quarter of 2008 had been marked by an "unheard of ... collapse in industrial production".

In an echo of this message, French car makers - whose sector directly or indirectly employs 10 percent of the entire national workforce - revealed sales had tumbled 7.9 percent in January.

Sarkozy's office announced the president would defend his economic policies in a televised speech on Thursday, as a new poll showed a majority of French people believe the government is on the wrong track.

Sixty-two percent of French voters believe Sarkozy's stimulus plan is not an efficient weapon against the crisis, while 61 percent want unions to keep up the pressure on the government, according to the CSA poll of 1,002 people.

[AFP / Expatica]

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