PARIS (Reuters) – The French government will mobilise 40 billion euros ($45 billion) to support industries the hardest hit by the coronavirus crisis as part of a response that will push debt to record levels, finance ministry officials said on Thursday.
The money, made up mainly of fresh spending and loans, is to be used for sector-support plans for tourism, the automobile, aerospace and tech industries, the officials said.
The funds are part of an update to the 2020 budget the government is to present on Wednesday, which budget minister Gerald Darmanin said would give a record public sector budget deficit of 11.4% of economic output, revised up from 9% only a few months ago.
The government has had little choice but to increase the deficit as the euro zone’s second-biggest economy plunged into its worse post-war recession with gross domestic product expected to contract 11% this year.
As a result, the national debt was expected to swell to an unprecedented 120.9% of economic output, one French official said, adding that European Central Bank bond purchases were helping to contain the cost of increased borrowing.
“We are lucky to be able to take on long-term debt at low rates,” the source said. “The time will come when we have to improve our public finances because the accumulated debt will have to be reduced and that will happen mainly by the return of growth.”
Wednesday’s budget update, the third since the coronavirus crisis swept into France in March, foresees fresh spending of 13 billion euros, including an extra 5 billion for state-subsidised furloughs, which have covered 13 million people so far.
The government has already announced plans for the tourism and automobile industries and measures for the tech industry are due on Friday with aerospace to follow next week.
(Reporting by Leigh Thomas; editing by Geert De Clercq, Gareth Jones and Barbara Lewis)