France to cover cost of €100bn stimulus package with higher growth

Prime minister says a costly coronavirus recovery package will be paid off by 2025

Jean Castex, the French prime minister, and Bruno Le Maire, the French finance minister
Jean Castex, the French prime minister (left) with finance minister Bruno Le Maire

France will wipe the €100bn (£76bn) cost of its Covid-19 economic recovery package from its debt pile by increasing growth over the next five years, its prime minister has pledged.

The finances of the eurozone’s second-largest economy were already creaking but Jean Castex said France will inject the equivalent of four percentage points of GDP into its recovery effort, pushing the debt-to-GDP ratio up to almost 121pc. 

Figures from the Office for National Statistics last week showed Britain’s national debt was worth 100.5pc of GDP in July.

"The recovery plan should not weigh on public finances – quite the contrary," Mr Castex said, adding that the money would be pumped into creating jobs, especially for young people, and retraining people who lost their jobs in the recession. 

Some €30bn will be directed at tackling climate change, while a quarter of the recovery fund money has been earmarked for small and medium-sized businesses. France is also set to receive a €40bn EU bailout.

Mr Castex reiterated a government promise not to increase taxes and to maintain planned cuts to business taxes, including property charges for industry, local VAT and corporation tax.

Bruno Le Maire, the French finance minister, has previously promised €10bn in production tax cuts from January to support businesses reshoring to France.

It comes as fears rise about a second major wave of coronavirus infections in France.

“We are preparing for all eventualities, including one in which our health system comes under pressure again,” Mr Casetx said.  

“We are prepared. The equipment is there. The beds are there. Our main aim is to do everything to avoid a general lockdown whose costs and consequences are incalculable.”