France lifts pandemic response to 136b euros

[PARIS] France raised its coronavirus response measures to nearly 136 billion euros (S$213.74 billion) on Wednesday, bringing the cost to 5.6 per cent of gross domestic product (GDP) in its third budget revision so far this year.

The government had put the cost at 110 billion euros in April but has since had to make upward revisions to take account of falling tax revenue and extra spending, it said in its budget update.

Combined with various financing guarantees the state has extended to companies and European Union institutions, Finance Minister Bruno Le Maire said the government was mobilising a total 460 billion euros, or 20 per cent of GDP.

"This response is perfectly comparable with what other countries are doing, including Germany," Mr Le Maire told lawmakers on the lower house of Parliament's finance committee.

President Emmanuel Macron's government now expects the eurozone's second-biggest economy to contract 11 per cent this year, which France's independent fiscal watchdog described on Wednesday as "cautious" despite being the worst slump since at least World War Two.

The government put France under one of Europe's most stringent lockdowns from mid-March, shutting down vast swathes of the economy, and only began lifting restrictions on May 11.

Companies have put more than 13 million workers on state-subsidised furloughs at a cost the government put at 31 billion euros in the revised budget, shouldered two-thirds by the state and the rest by unemployment insurance.

The government has also deferred billions of euros in tax and payroll charges and mobilised 40 billion euros in state aid, tax breaks, loans and guarantees for the tourism, automobile, tech and aerospace sectors.

With tax revenue falling fast, the government now expects an unprecedented public sector budget deficit of 11.4 per cent of economic output this year, revised up last week from 9.1 per cent in April.

REUTERS