Sarkozy unveils 26-bln-euro stimulus plan

4th December 2008, Comments 0 comments

France is the latest industrialised country to announce a massive stimulus plan to spur its economy.

5 December 2008

DOUAI – President Nicolas Sarkozy unveiled a massive stimulus plan worth EUR 26 billion on Thursday to help France resist the global economic slowdown.

The plan combines major state infrastructure projects with targeted measures to improve cashflow for hard-hit businesses, protect jobs and shore up France's vital car and construction industries.

Sarkozy used a trip to Douai in northern France, home to a major Renault car factory, to unveil the plan, which he described as an investment-driven bid to stimulate growth and employment.

"Our answer to the crisis is a massive investment drive, because that is the best way to support businesses and to protect jobs," Sarkozy said.

"We cannot be content with simply limiting the damage. We need to be ambitious, bold, imaginative."

Sarkozy announced a total of EUR 10.5 billion in state investments for 2009, pulling forward EUR 4 billion of scheduled transport, education and defence projects, as well as ploughing EUR four billion into the state energy, transport and postal companies.

To improve business cashflow, Sarkozy said the state would speed up the repayment of sales tax and of tax refunds for research and development investments, measures worth EUR 11 billion.

He also unveiled targeted measures for the car and construction industries, which account for some four million French jobs and have been hardest hit by a recent spike in the country's jobless figures.

With the Big Three US car makers seeking Congressional backing for a massive bailout, France's national auto champions Renault and Peugeot have announced thousands of job cuts amid a collapse in sales.

To help carmakers shift unsold stocks of close to a million vehicles, the bonus for owners who scrap an old vehicle to buy an energy-efficient new one is to be lifted from EUR 300 to 1,000.

Auto manufacturers are also set to get aid for developing electric and other environmentally friendly cars.

For struggling construction firms, Sarkozy announced plans to build 100,000 new social housing units, support energy-efficient property renovation work and to double of zero-percent property loans.

The lowest-income French families were also set to receive a one-off "bonus" of EUR 200 to boost flagging consumer spending.

France has so far narrowly escaped the tide of recession stalking the industrialised world but the OECD forecasts it will fall into recession in 2009, with the economy contracting 0.4 percent.

EU data confirmed Thursday that the economy of the 15 nations sharing the euro entered its first official recession in the third quarter.

Meanwhile new French data confirmed a rise in the jobless, whose numbers jumped 46,900 in October for the biggest increase in 15 years.

French unemployment, one of Europe's highest, rose to 7.3 percent in the third quarter of this year, the national statistics body INSEE said. The OECD has forecast it will reach 8.2 percent next year.

Sarkozy's plan comes on the heels of a 20-billion-euro strategic investment fund launched last month to shield French industry from foreign predators.

The European Commission last week called for an overall package worth EUR 200 billion, drawn from national plans and EU funds, to snap Europe's economy out of recession through spending hikes and tax breaks.

To drum up the necessary resources, it agreed temporarily to relax EU public finance rules, including for repeat offenders such as France where the public deficit is set to overshoot the EU limit of three percent of output next year.

But critics have questioned how much of the money announced so far by European governments is new - and how much is simply existing budget allocations re-packaged as stimulus funds.

[AFP / Expatica]

0 Comments To This Article