Thursday, 20 January, 2022

Coronavirus: in France, the real scale of the budgetary effort still difficult to quantify


The government announced an emergency plan amounting to 45 billion euros, supposed to reduce the deficit to 3.9% of GDP. But these amounts are doomed to be quickly exceeded, certain mechanisms such as partial unemployment meeting with great success.

Bruno Le Maire, the Minister of Finance and the Economy, has already warned that the envelope devoted to the financing of short-time working would be revised upwards.

To justify his aid plan and the end of budgetary orthodoxy, the Minister of Public Accounts Gérald Darmanin had a formula: “When the house is on fire, we do not count the liters of water to put out the fire”. In fact, the executive did not hesitate to take out the canadair to manage the economic consequences of the coronavirus crisis: while Bercy had initially counted on around thirty billion, in three days the total amount was raised. to 45 billion euros. In addition, there is a mechanism for public guarantees for loans granted to companies, which can go up to 300 billion.

These figures, already substantial, have continued to grow. Everything has been calculated on the assumption of confinement limited to one month, and a rapid return to normal demand, recalled the High Council of Public Finances ten days ago. Suffice to say that the bill will lengthen if the virtual shutdown of the economy continues. This could be the case for cash flow measures – with the deferral of tax and social charges – which represent a large part of the envelope (33.5 billion). And it will be necessary to see if these postponements will not turn in certain cases into outright cancellations, which would have much more visible budgetary effects on the public accounts.

The government announced an emergency plan amounting to 45 billion euros, supposed to reduce the deficit to 3.9% of GDP. But these amounts are doomed to be quickly exceeded, certain mechanisms such as partial unemployment meeting with great success.

Bruno Le Maire, the Minister of Finance and the Economy, has already warned that the envelope devoted to the financing of short-time working would be revised upwards.

To justify his aid plan and the end of budgetary orthodoxy, the Minister of Public Accounts Gérald Darmanin had a formula: “When the house is on fire, we do not count the liters of water to put out the fire”. In fact, the executive did not hesitate to take out the canadair to manage the economic consequences of the coronavirus crisis: while Bercy had initially counted on around thirty billion, in three days the total amount was raised. to 45 billion euros. In addition, there is a mechanism for public guarantees for loans granted to companies, which can go up to 300 billion.

These figures, already substantial, have continued to grow. Everything has been calculated on the assumption of confinement limited to one month, and a rapid return to normal demand, recalled the High Council of Public Finances ten days ago. Suffice to say that the bill will lengthen if the virtual shutdown of the economy continues. This could be the case for cash flow measures – with the deferral of tax and social charges – which represent a large part of the envelope (33.5 billion). And it will be necessary to see if these postponements will not turn in certain cases into outright cancellations, which would have much more visible budgetary effects on the public accounts.