Manufacturing sector "in decline", another European country uses money to keep businesses in their homeland

Want to get money from the French government , just stay in France!

This leading European member state hopes that the above amendment will pave the way for the economy and business environment to improve competitiveness, in the face of the irresistible attraction of the world's leading investment destinations, such as the US and China.

France's revised 2024 budget bill stipulates that "Multinational companies that want to access public investments from the French government must remain in the country for at least 10 years after receiving the investment money."

Nền sản xuất 'mất phanh', thêm một nước châu Âu tìm cách níu kéo doanh nghiệp ở lại quê nhà

Too many French industries have moved production to other EU countries. (Source: Shutterstock)

Responding to the great challenges of the times

The amendment, first revealed by French news agency Contexte , would add social criteria for any company that wants to benefit from the funds from the “France 2030 Plan” – a €54 billion national investment plan aimed at re-industrialisation and the development of cutting-edge technologies.

Commented as "a huge budget to respond to the great challenges of the times" - with "Plan France 2030", President Emmanuel Macron hopes to open a 10-year development path for France.

Accordingly, Paris is determined to invest heavily to be able to prepare and master all technologies, as well as develop new technologies to respond to future challenges, especially in digital or ecological transformation.

The “France 2030 Plan” was first introduced in 2021 as the Covid-19 pandemic raged, aiming to provide subsidies to boost the development of Small Modular Reactors (SMRs) and green hydrogen, and support the production of two million electric vehicles by 2027, among other goals.

Part of the 2024 Budget Bill, the details of which are currently being discussed by MPs in the Finance Committee of the French National Assembly , aims to confirm and control the conditions set out in the “France 2030 Plan”.

Among them, a condition proposed by far-left MPs was unexpectedly passed - which required large companies to "maintain their economic activity on French territory for at least 10 years, after receiving the investment". These companies must also maintain their workforce at the same or higher levels than when they first received the money.

Furthermore, each company and government are required to have a common industrial strategy to spread industrial development to poorer, more heavily deindustrialized areas of French territory. Companies that do not comply with these rules will be required to repay the total amount of subsidies.

“Too much French industry has moved production to other European Union (EU) countries,” said far-left La France Insoumise (LFI) MP Laurent Alexandre.

This is a very worrying issue, he said - it is time for companies to start taking responsibility for the public money the government spends on them. The MP also called on the government to “stop the bleeding”.

Are President Macron's reforms paying off?

According to recently released data, in the general difficulties of Europe, the leading economy of the region - Germany, fell into recession, while France's GDP continued to grow and reforms have begun.

The French economy grew 0.1% in the third quarter of 2023, after growing 0.6% from April to June. Meanwhile, the German economy had a "rather sad" report as output fell in the third quarter, increasing the risk of a prolonged recession.

Not long ago, France was considered the “laggard of Europe” due to its lack of economic reforms and high unemployment rate. However, what the country has achieved today is considered a worthy “reward” for President Macron’s “strong” reforms.

Yet France’s current economic superiority is said to have deeper roots. “President Emmanuel Macron is reaping the rewards of the ambitious reforms he has implemented since first coming to power in 2017,” says German law and economics professor Armin Steinbach of HEC University. “The government has reduced corporate taxes, liberalized the labor market, reformed unemployment insurance, and pushed through a difficult pension reform.”

The expert added that Mr. Macron's reform program is also having a significant impact on the country's unemployment rate, which is currently at 7% - a 20-year low.

But economist Catherine Mathieu, at OFCE, the Paris-based economic observatory of Sciences Po, said that the French economy “is not a model student.” Rather, she said, the German economy has “performed particularly badly” over the past three years.

"On average, eurozone GDP has grown by 3.1% since the end of 2019. France is in the middle of the table with 1.7%, but Germany is at the bottom with growth of just 0.2%."

Many experts believe that the French economic structure seems to be following the German industrial orientation.

“France is really following in the footsteps of Germany and is pushing for innovative industrialization. But it is important for the eurozone to include structurally different economies, so that not all the economies in the region are in recession at the same time,” said Anne-Sophie Alsif, chief economist at Paris-based audit consultancy BDO.

But France’s 2023 success story has its problems. The country’s public debt has soared to more than €3 trillion ($3.16 trillion) – 112.5% of GDP – from less than 100% in 2019. Its annual budget deficit is around 5%, well above the EU’s 3% deficit ceiling.

That won't lead to France going bankrupt anytime soon, economists say. But its accumulated debt will eventually "explode."

“If a country uses a lot of its money to pay off debt, it can’t use that money for more important purposes,” HEC expert Steinbach stressed. “At some point, austerity measures will be necessary, which can lead to political instability. And then there will be no more money left to implement generous public welfare programs.”

Source