It was one of the main campaign pledges of Emmanuel Macron as a presidential candidate, and it is now a concrete measure: French Prime Minister Edouard Philippe announced his government’s “Great Investment Plan” this week. Even in the wake of many recent reforms, the “Great Investment Plan” deserves special attention since it is, so far, the French Government’s first long-term policy announcement. Rather than taking the word “investment” in its literal accounting sense, it is important to focus on its economic meaning; with this investment plan, the government takes a cultural slant towards businesses and enterprise.
Starting his presidential mandate by announcing an ambitious investment plan, Emmanuel Macron follows in his predecessors’ footsteps. Nicolas Sarkozy was the first to launch a €35 billion “great loan plan” to respond to the 2008 economic crisis through boosting public investment. His successor François Hollande followed suit by deciding in 2013 to launch a second stage of Sarkozy’s initial plan with a €12bn investement and a third stage with a €10 billion investment two years later – which was never financed.
On September 25th, 2017 it was the Macron government’s turn to commit to increasing public investment through the voice of Edouard Philippe, his Prime Minister, and Jean Pisani-Ferry, a renowned economist who was in charge of Macron’s economic program during the Presidential campaign. Presented as a crucial implement to enable the country’s transformation, French PM Edouard Philippe stated that this €57 billion plan targets two main objectives: to support the numerous reforms currently implemented by the government, and “to restore a culture of innovation and long-term investment in the sphere of public authorities”.
However, the French government is torn between two likely incompatible objectives: increasing public spending to support national investment on the one hand, and meeting the EU financial requirements on the other hand, since President Macron has committed to limiting France’s public deficit to 2.6% of the country’s GDP for 2018, which would mean a savings of €200 billion.
To understand the government’s fine balancing act, it is necessary to look at what this huge sum encompasses. €33 billion of €57 investment plan consist of reallocated funds. Since Jean Pisani-Ferry’s report states that investing in new infrastructure should not be considered as a top priority, these funds will be invested instead in vocational training. The remaining €24 billion will be financed by a mix of budgetary funds and financial instruments handled by the Caisse des Dépôts – France’s Deposits and Consignments Fund, a public sector financial institution controlled by the French Parliament – to abide by President Macron and PM Philippe’s decision that public borrowing is not an option, in line with Brussels’ requirements.
Where the French media is skeptical about President Macron’s campaign claims that the Great Investment Plan is an ambitious and innovative lever, it singles out four key areas that appear to be major economic challenges for France today: its energy and environmental transition (€20bn), professional skills and vocational training (€15bn), innovation and competitiveness (€13bn) and France becoming more digital (€9bn).
In addition, “investment” should be seen from an economic perspective: investing in French workers’ skills or new agricultural production mode will not provide a short-term and accountable ROI. However, these initiatives are designed to improve France’s long-term competitiveness.
The announcement of the Great Investment Plan was undeniably well-timed. The plan, in its commitment to France’s most vulnerable, comes as a much-needed salve following Macron’s recent labour ordinances that were met with public criticism, and followed by a finance bill which reduces taxes paid by the wealthiest part of the population.
By: Line Rochard