A plan to revive France and Emmanuel Macron’s fortunes

After pouring tens of billions of euros into the economy to cushion the effects of the coronavirus shutdown, the French government is now planning to inject €100bn of fresh stimulus. With the eurozone’s second-largest economy set to contract by an eye-watering 11 per cent this year — and with the region’s recovery losing momentum and the single currency climbing against the dollar — there is a powerful case for a further fiscal injection to boost growth.

Freed from the shackles of EU fiscal rules, President Emmanuel Macron can afford to be bold. Worth 4 per cent of gross domestic product over two and a bit years, France’s stimulus is slightly larger as a share of national output than the German plan launched in June. In other respects, the French package is markedly different from the one adopted by Berlin. It is as if the two countries have swapped roles. Abandoning ordoliberal orthodoxy, Germany cut value added tax and made direct payments to households to boost demand and consumption, the kind of Keynesian approach France tried for decades with little enduring benefit.

This time Paris has steered away from stimulating consumption directly, arguing that incomes have barely shrunk during the crisis thanks to generous job subsidies and ample household savings. Instead,…

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