D.The French President was particularly pleased to receive this guest on Wednesday: In the afternoon, Emmanuel Macron welcomed the President of the EU Commission, Ursula von der Leyen, to the Elysée Palace. She had traveled to Paris to give the green light to the French reconstruction plan with funds from Europe. France receives 39.4 billion euros from the European aid fund as part of direct aid, making it the third largest recipient country after Italy and Spain. 40 percent of France’s 100 billion euro investment and economic stimulus plan therefore come from Brussels, although it should also be taken into account that France co-finances the funds because it is one of the largest EU contributors and enjoys low interest rates on the capital markets.
The plan with which the French want to economically leave the consequences of the pandemic behind them goes beyond the requirements from Brussels in two points: Where the EU demands a share of 37 percent for the climate and environmental change, France leaves half of its 100 percent Billions of euros will go to this purpose, for example with high subsidies for the insulation of houses, apartments and public buildings, with the implementation of a hydrogen strategy and the expansion of low-emission means of transport, especially rail. The French government also wants to go beyond the minimum threshold for digitization, which, according to Brussels, should benefit at least 20 percent from EU funds and spend a quarter on this goal. Schools, authorities and companies are to be digitized, and there are plans to close the “digital divide” with disadvantaged people. Increased vocational training measures are the third major block of expenditure.
An imposition for the French
The French government had fought for the EU plan and is now looking forward to the new phenomenon of the European flood of money. At the front of the structural reforms, however, the difficult everyday life of the pre-crisis period is apparently returning. Right now, when the French are celebrating the return to normality with a new zest for life, three unions have announced strikes at the state rail operator SNCF just in time for the start of the holidays in July. Its employees received almost all of their normal salary during the pandemic, but not the bonuses that also depend on the traffic volume. The Unsa union speaks succinctly of “general dissatisfaction” among employees. Negotiations to change the minds of those willing to strike are still ongoing.
As before the pandemic, the government is also facing great resistance. The State Council, as the highest administrative court, has partially stopped the reform of the deficit unemployment insurance for the time being. “The gap between unemployment insurance benefits and earned income in France is one of the lowest in the euro area,” reports economist Denis Ferrand from the Paris consultancy Rexecode. This means that entering the labor market is not necessarily worthwhile. This is particularly the case with short-term contracts, with which quite a few French people jump back and forth between employment relationships of one or a few days and unemployment, for example in the catering or construction industry.
So the government wants to make unemployment insurance a little less generous. The calculation of daily earnings is to change, and in future you will have to have worked six months instead of just four months in order to have the first entitlements. A gradual reduction in unemployment benefits is planned for high earners over time, and companies should pay an additional tax if they have agreed a particularly large number of fixed-term contracts. The Council of State now waved it off. The Conseil d’Etat found in a verdict that contains surprisingly few legal arguments that the project is currently an imposition for the French due to the continuing economic uncertainty. The government emphasized that the State Council did not reject the reform and hopes that the reform will come into force before the end of the year.
Concerns about the election manifesto of the CDU
“France is generally having a hard time getting started with the end of the pandemic aid,” states the economist Ferrand. This is all the more true since the first round of regional elections last weekend, which inflicted serious setbacks on the representatives of Macron’s ruling party. The project of a pension reform, which was already heavily controversial before the Covid 19 crisis, has also become unlikely. Macron recently indicated that he could bring the project back to the table “in a different form” before the presidential election in April 2022, but most observers consider the chances of this to be slim. Despite the major economic losses in the wake of the pandemic, the willingness of the population to extend their working life does not seem to have increased. The pension funds are also confronted with high deficits because of the early retirement age by international standards.
With around 14 percent of gross domestic product, the pension system is one of the largest government spending blocks and thus contributes to national debt. The French Court of Auditors recently complained that government borrowing in 2024 could nowhere be as high among euro area countries as in France. At the European level, the French government is therefore calling for a permanent easing of the debt limits. The CDU’s election manifesto recently presented, which calls for a swift return to budgetary discipline, has therefore met with concern in France.