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30/09/2016

France announces investment push

Euro & Finance

France announces investment push

The French National Assembly, Paris.

[Anton_Ivanov/Shutterstock]

While EU member states are kept waiting for the Juncker plan, the French government has announced its own plans to reinvigorate investment. EurActiv France reports

On Wednesday, (8 April) the French government launched a series of fiscal measures aimed at boosting investment, as the European Union awaits the Commission’s rescue plan that will breath new life into the bloc’s anaemic economy. It is hoped that the measures, worth €2.5 billion over five years, will encourage businesses to invest in the future. The Juncker Plan will represent 126 times this sum, and will ideally help restart economic growth in Europe, where a lack of new money has held back the recovery.

The French plan will give companies a return of 140% on their industrial investments, reducing their tax burden. French Public Investment Bank capital will also be bolstered, to help it in its role of supporting SMEs.

Finally, the French regional authorities will be offered interest-free loans from the Deposits and Consignments Fund (CDC). But the Prime Minister, Manuel Valls, has not reversed the recent cuts to local authorities, made to appease Brussels, which demanded that France rein in its public spending.

A crucial issue for France

Relaunching investment is crucial for France’s economy. Although levels of consumption and purchasing power remain fairly stable, economists say that a lack of investment is the main issue preventing the return of economic growth. According to the National Institute for Statistics and Economic Studies (INSEE), levels of investment are set to stay the same or rise by 0.1% in the first trimester of this year.

France has committed €8 billion to the Juncker Plan through the CDC and the Public Investment Bank (BPI); investments with the added benefit of being excluded from calculations of the French budget deficit, and which will not affect the country’s ability to reach its 2017 deficit reduction targets.

Paris predicts its economy will grow by around 1% in 2015. The falling value of the euro against the dollar, as well as the relatively low price of oil, should make the deficit reduction objectives easier to achieve.

The tax cuts for businesses announced by the French government on Wednesday were accompanied by a number of social measures, including the creation of a personal activity account for employees. The Prime Minister also criticised business leaders for their sluggishness in fulfilling their employment commitments.

With the new social measures, the government hopes to win back the confidence of the Socialist Party’s left wing, which had threatened to rebel during the party’s June congress in Poitiers.

Positions

The General Confederation of Small and Medium-sized Enterprises (CGPME) welcomed a "truly good measure" after Manuel Valls' announcement of a €2.5 billion tax break for businesses to encourage them to invest.

"This significant financial measure could cut companies' tax bills by up to 13% of the value f their invesments," the organisation stated. "Its impact will be real and tangible for companies that can invest".

Medef stated in a press release that "measures favouring investment: positive initiatives should not conceal the real issue, which is the pursuit and re-establishment of companies' profits".

Background

Commission President Jean-Claude Juncker has announced a plan to mobilise €300 billion in an effort to kick-start the European economy.

Jyrki Katainen, the Commissioner for Jobs, Growth, Investment and Competitiveness, planned the package to include public-private partnership, to increase the loan capacity of the European Investment Bank (EIB) and the Union's other loan providers, to increase the level of investment by the member states in infrastructure, and to continue to develop the single market.

The details of the plan were revealed on 25 November, and were on the agenda for the December meeting of the European Council. Capital from the EIB, based in Luxembourg, is at the centre of the plan, which involve creating a European strategic investment fund, as well as tools to allow the EIB to take greater risks in its investments.

Solidarity with the countries of southern Europe, those worst affected by the crisis and austerity measures, is also an important part of the Juncker Plan.

>> Read: Juncker's €315bn investment plan unveiled: fifteenfold leverage and solidarity for the south