Leading opposition figures and economists alike questioned the feasibility and relevance of President Nicolas Sarkozy's recently unveiled stimulus package, suggesting the plan was more an exercise in damage control than a turnaround.
AFP - President Nicolas Sarkozy unveiled a 26-billion-euro stimulus plan on Thursday to help France fight a global slowdown with massive state investment and aid for the struggling car industry.
France's contribution to a Europe-wide economic revival drive, the plan combines big state infrastructure projects such as four new high-speed TGV train lines with measures to shore up hard-hit businesses and boost housing.
"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 during a trip to Douai in northern France, home to a major Renault car factory.
French Prime Minister Francois Fillon said the plan would add a percentage point to French economic growth next year. The International Monetary Fund has forecast a 0.5-percent contraction of the French economy in 2009.
"We are in the process of adding an additional point to growth for 2009," he told the TF1 television channel late Thursday. "It's a very powerful plan which by its nature will reestablish confidence."
But economists questioned how much of the money announced was new and how much was simply existing budget allocations re-packaged as stimulus funds.
"This is relatively limited and fairly defensive. I don't have the impression that we're really trying to have a turnaround but that we're trying to stop the economy from collapsing," said Olivier Gasnier of BNP Paribas bank.
The economist Thomas Piketty said the problem was that the "government doesn't have any more money" and calculated that "new spending" among the measures announced by Sarkozy amounted to no more than three billion euros.
The measures were denounced by the opposition Socialists as merely recycling projects already planned.
The party's Segolene Royal, who was Sarkozy's opponent in the last presidential election, said they were "mini-measures that were not adequate for the scale of the problem."
Sarkozy announced a total of 10.5 billion euros (13 billion dollars) in state investments, bringing forward four billion euros of scheduled projects on top of four billion euros for the state energy, transport and postal companies.
To improve business cashflows, Sarkozy said the state would speed up the repayment of sales tax and of tax refunds for research and development investments in a package of measures worth 11 billion euros.
A mix of tax breaks and other incentives for businesses worth 700 million euros were rolled out to encourage job creation after recent data confirmed France had crossed the threshold of two million jobless in October.
Sarkozy unveiled targeted measures worth 1.5 billion euros for the car and construction industries, which together account for about four million French jobs and have been hardest hit by the downturn.
A 300-million-euro restructuring fund for the car industry, notably car parts suppliers, was unveiled along with a bonus of 1,000 euros for car owners who scrap their old vehicle to buy an energy-efficient new one.
The French state will also provide a one-billion-euro loan facility to support national champions Renault and Peugeot, which have announced thousands of job cuts amid a collapse in sales.
For struggling construction firms, Sarkozy announced plans to build 100,000 new social housing units, support energy-efficient property renovation work and to double the number of zero-percent property loans.
The lowest-income French families were also set to receive a one-off "bonus" of 200 euros to boost flagging consumer spending.
The plan, worth 26 billion euros in all, will put government finances further in the red by 15 billion euros, with the public deficit set to climb to four percent of gross domestic product, well above the three percent European benchmark, officials said.
Fillon said the deficit would be 3.9 percent of GDP in 2009, 2.9 percent in 2010, 1.9 percent in 2011 and 0.9 percent in 2012.
France has so far narrowly escaped the tide of recession stalking the industrialised world but the OECD forecasts it cannot avoid it next year, with the economy contracting 0.4 percent.
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 for the EU worth 200 billion euros, drawn from national plans and EU funds, to snap Europe's economy out of recession through spending hikes and tax breaks.
Date created : 2008-12-05