France: What to make of the criticism of the recovery plan?

The French government has introduced a EUR 100 billion recovery plan for the years 2021-2022, with three main priority areas : the energy transition, competitiveness and innovation, and solidarity. Several aspects of this plan have been criticised. We examine whether this criticism is well-founded. It has alleged that: The plan is too small. But France’s fiscal deficit in 2021 will fully offset the fall in GDP (income) relative to what would have been without the COVID crisis; It mainly supports companies and not households. But the household savings rate is already extremely high. It would be absurd for the government to transfer more income to households in order for these households to then save these income transfers and therefore lend them back to the government; N o conditions are attached to the support for companies, in particular the production tax cut. But the government cannot impose conditions on companies that face very heterogeneous situations, some of which are in major difficulty; ex post , it will be important to assess the efficiency of the measures to support companies . But requiring a quid pro quo from companies ex ante would demand a huge bureaucracy to assess the situation of each company.