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

If you want to receive money from the French government , just stay in France!

This leading European member state expects that the amendments will pave the way for an improved economy and business environment, enhancing its competitiveness in the face of the irresistible allure of top global investment destinations such as the United States and China.

France's revised 2024 budget bill stipulates that "multinational companies wishing to access public investments from the French government must remain operating in the country for a minimum of 10 years after receiving the investment."

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 our time

This amendment was first revealed by the French news agency Contexte . According to the bill, it will add social eligibility criteria for any company wishing to benefit from the funds in the "France 2030 Plan" – a €54 billion national investment plan aimed at re-industrialization and the development of cutting-edge technologies.

Described as "a massive budget to address the great challenges of our time," President Emmanuel Macron's "France Plan 2030" is expected to usher in a decade of development for France.

Accordingly, Paris is determined to invest heavily in order to prepare for and master all technologies, as well as develop new technologies to respond to future challenges, especially in digitalization and ecological transition.

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

Part of the 2024 budget bill, including details currently being debated by members of the French National Assembly 's Finance Committee, aims to validate and enforce the conditions set out in the "France Plan 2030".

Unexpectedly, a condition put forward by far-left MPs was passed – requiring 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 a level similar to or higher than when they first received the investment.

Furthermore, each enterprise and government was required to have a common industrial strategy to disseminate industrial development to the poorer, more heavily unindustrialized areas of French territory. Companies that failed to comply with these rules would be required to repay the total amount of subsidies.

"Too many French industries have moved production to other European Union (EU) countries," said Laurent Alexandre, a far-left member of parliament from La France Insoumise (LFI).

According to him, this is a very worrying issue – it's time for companies to start being held accountable for the public money the government has spent on them. The MP also called on the government to "stop this bleeding."

Are President Macron's reforms paying off?

According to recently released data, while Europe is facing general difficulties and Germany, the region's leading economy, is in recession, France's GDP continues to grow and reforms have begun.

The French economy grew by 0.1% in the third quarter of 2023, following a 0.6% growth from April to June. Meanwhile, the German economy had a rather "dismal" report, with output declining in the third quarter, increasing the risk of a prolonged recession.

Not long ago, France was considered the "slowest in Europe" due to a lack of economic reforms and high unemployment rates. However, its current economic achievements are now seen as a fitting reward for President Macron's bold reforms.

Furthermore, France's current economic dominance is believed to have deeper underlying causes. German law and economics professor Armin Steinbach of HEC University argues that, "President Emmanuel Macron is reaping the rewards of the ambitious reforms he has implemented since first taking power in 2017. These include reducing corporate taxes, liberalizing the labor market, reforming unemployment insurance, and pushing through a challenging pension reform."

The expert added that Macron's reform program is also having a significant impact on the country's unemployment rate, currently at 7% – the lowest in 20 years.

But economist Catherine Mathieu, According to OFCE – the economic observer body of Sciences Po University based in Paris – the French economy “is not a model student.” Rather, she argues that the German economy has “performed particularly poorly” over the past three years.

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

Many experts believe that the structure of the French economy seems to be following the German industrial model.

“France is really following in Germany’s footsteps and is pushing for innovative industrialization. But it’s important for the Eurozone to include economies with different structures, so that not all economies in the region decline at the same time,” said Anne-Sophie Alsif, chief economist at Paris-based auditing and consulting firm BDO.

However, France's success story in 2023 also has its problems. The country's public debt has soared to over 3 trillion euros (3.16 trillion USD) – 112.5% of GDP, compared to less than 100% in 2019. The annual budget deficit is around 5%, much higher than the EU's 3% deficit ceiling.

According to economists, this will not lead to France's immediate bankruptcy. But its accumulated debt will eventually "explode."

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

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