France has rolled out an emergency €45bn rescue package for its coronavirus-stricken economy and pledged an array of possible measures, including nationalisation and an extended ban on short selling, if it needs to save important companies.
Bruno Le Maire, finance minister, laid out the government’s budget-busting plans at a news conference by telephone on Tuesday as he forecast the French economy would shrink by about 1 per cent this year instead of growing more than 1 per cent as previously forecast.
The UK is set to follow suit later on Tuesday, with chancellor Rishi Sunak expected to unveil a major package of measures to help Britain’s businesses through the crisis, focusing initially on airlines, travel companies, and the hospitality sector.
On Monday, Giuseppe Conte, Italy’s prime minister, said the rest of Europe would follow the “Italian model” in responding to the crisis as he unveiled a €25bn spending package to shore up the health system and safeguard jobs.
In a speech to the French nation on Monday night, President Emmanuel Macron further tightened restrictions on freedom of movement, suspended economic reforms and delayed the second round of local elections in the fight against coronavirus, declaring in a speech: "We are at war."
Mr Le Maire said: "We also have an economic and financial war. This war will be long, it will be violent, and we must mobilise all our national, European and G7 forces."
The €45bn of emergency measures, previously Mr Le Maire had mentioned only “tens of billions”, include €32bn for a month of deferred corporate tax and social security charges and €8.5bn for two months of state payments to workers temporarily laid off by their employers because of the crisis.
In addition the French state will guarantee €300bn of bank loans to businesses to ensure they do not collapse for want of liquidity, while eurozone members had collectively offered €1tn in such national guarantees. "Today banks have no reason to refuse any loan to any company," Mr Le Maire said.
He also said the government was ready to protect important French companies, by recapitalising them, buying shares or even taking them over. "I could even use the word nationalisation if necessary," he said.
The finance ministry has already been studying how to support Air France-KLM, which has lost most of its business as a result of the pandemic, and Mr Le Maire said he met the airline’s chief executive Ben Smith three days ago to discuss the crisis.
France has also joined Spain, Italy and Belgium in banning the short selling of stocks to calm investors rattled by heavy price falls.
The Autorité des Marchés Financiers, the French regulator, said the ban would cover 92 stocks and initially last a day. It applies to blue-chips such as Air France-KLM, BNP Paribas and Renault, as well as small and mid-cap stocks.
Mr Le Maire hailed the decision as necessary and said: "We are ready to go further, we are ready to go up to a month, and it’s a decision taken at the European level. We want to avoid speculation on the markets."
(Published by Financial Times, March 17, 2020)
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