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France Economic Policy Roundup 1 October

Unemployment: According to the French Department for Employment, the number of unemployed jobseekers (catégorie A, non-ILO definition) fell by 51,300 in August (excl. Mayotte) to 3.5 million (-1.4%). This is the fourth consecutive monthly decline. The department for Employment expects to return to February 2020 unemployment rates within a month or two if this trend continues.

The number of unemployed (all categories) fell by 43,500 compared to approximately 40,000 in July 2021. Some of the unemployed have returned to work, as evidenced by the new increase of nearly 8,000 people registered in categories B (less than 78 hours worked in a month) or C (more than 78 hours). However, the number of jobseekers (categories A, B and C) registered with Pôle Emploi unemployment agency remains around 5.9 million, which is above pre-crisis levels by 208,000.

Covid-19: Budget Minister Olivier Dussopt estimates the pandemic has cost the State between €170 and €200 billion in 2020 and 2021. In 2020, exceptional emergency spending was over €70 billion and more than 70bn in 2021 in expenses, including revenue losses due to a decrease in economic activity. Minister Dussopt estimates Covid-19 debt at €165 billion. The Minister expects deficit to fall to 4.8% in 2022 (8.4% in 2021) pending sanitary developments. 

Government freezes gas prices and caps electricity increases

Prime Minister Jean Castex announced on 30 September a freeze on regulated gas tariffs and a 4% cap on electricity price increases via a sharp drop in energy taxes. The freeze on regulated gas tariffs until April 2022 and until February 2022 for the cap in the rise of electricity prices. The price of gas is expected to rise by 12.6% on 1 October according to the Energy Regulation Commission. According to Le Mondethis represents a 57% increase in prices since the beginning of the year. Energy provider Engie’s regulated gas rates will remain at their current level until the end of May. The increase that should have taken place during the winter will then be "caught up" during the following 12 months, explains Les ÉchosIn other words, the government will smooth out the increase by spreading it over a longer period. This is based on market forecasts, which anticipate a sharp drop in international gas prices from the spring onwards. The government estimates that regulated rates would have risen by 30% in the last two months of the year had it not intervened. Minister Bruno Le Maire expects this “increase in gas prices will probably last several months and will certainly impact the coming autumn and winter seasons.”

To limit a hike in electricity prices, the government plans to reduce a tax on electricity via an amendment to the 2022 Budget Bill. The government wants to cap the increase at 4% over a period that would go from February 2022 to February 2023. This would counter a surge in prices that could have reached 12% by February 1, 2022, according to estimates given by the Environment Minister Barbara Pompili on 29 September. This cap will benefit those paying the regulated electricity tariffs (tarif bleu) that is to say 70 % of the households. According to the Prime Minister’s office, a decrease of the domestic tax on the final consumption of electricity (TICFE) which accounts for a third of consumers’ bill. This measure will be included in the Budget Bill via an amendment and will cost the State approximately €4 billion. The exact cost will depend on the rate calculation to be finalized in December 2021. The state is relying on €2 billion in savings from the financing of renewable energies, €600 million of additional VAT revenue on energy, and an improvement in EDF (Électricité de France) provider’s financial performance, allowing it to collect more corporate tax, as well as increased dividends paid by the electricity company to the State shareholder (84.5% share).

With regard to petrol, Prime Minister Castex assured that government remains “vigilant” although the increase in petrol prices has not been as strong. The Prime Minister also announced that the government is prepared to increase the amount of the energy voucher awarded to an estimated 6 million households should this be necessary despite announcements last week that recipients of this voucher would receive an additional €100 in December 2021. Finance Minister Le Maire and Industry Minister Pannier-Runacher have staunchly defended this measure, notably the increase of the energy voucher with Le Maire describing it as “effective and fair”. It is worth recalling that the energy voucher of €250 was introduced in 2018 in the aftermath of the Gilets Jaunes crisis, which erupted in October 2018 precisely due to a hike in petrol prices resulting from the increase in the domestic consumption tax on energy products (TICPE).

Le Figaro and Le Monde reported on responses to the measures notably from the opposition and civil society. Socialists and Greens deem the measures “insufficient” and as “too little, too late” while the right-wing sees these measures as part of “a pre-election campaign”. The radical left wing has castigated the government for blocking energy prices after the 12.6% increase”. Cited by Le Monde, consumer protection association UFC-Que choisir accuses the government of “procrastination” and “political management”. The association points out that the “regulated gas tariffs – due to disappear in 2023 – concerns only approximately 3 million households supplied by Engie.” More than two thirds of the other households have already switched to market offers, most of them at a fixed price. Another consumer protection association, CLCV, calls for the government to lower the VAT on electricity from 20% to 5.5% (VAT rate on necessities). A call echoed by a number of unions such as the CGT, one of France’s largest unions. 

Despite producing electricity at a relatively low cost thanks to its unique electricity mix (nuclear and hydraulic power), France is suffering from soaring prices because “the electricity and gas prices are aligned” explains Le Monde. The market price in France is linked to neighbouring countries, which use a higher share of coal and gas in their energy mix, such as Germany or Poland. Two other factors behind current price rises are the rebound in demand post-crisis and the doubling of the price of European CO2 emission allowances - the "pollution permits" to which large industrial companies are entitled – in one year, adds the paper. Other factors include pressure on Norway and Russia to increase supply as they are looking to satisfy booming Asian demand for natural liquefied gas, points out La Tribune. Minister Le Maire has called for a profound review of the European Union’s single electricity market, describing it as an “aberration” and its “obsolete” rules that create additional costs for households, reports Bloomberg. Minister Le Maire plans to put a proposed revision of the single power market on the EU table at the next ECOFIN Council (4-5 October) after sending a letter to Eurogroup President Minister Paschal Donohue asking that the issue be on the agenda. 

With less than seven months to go before the presidential election, energy is a sensitive topic for the government. According to an Opinionway poll, purchasing power is now the main concern of the French in the run-up to this election. If the government has acted “so quickly”, it is because it wants to avoid a resurgence of the Gilets Jaunes at all costs in the final stretch of the President’s mandate and less than seven months ahead of the elections, explains Les Échos. President Macron wants to avoid the energy crisis overshadowing the efforts made in terms of purchasing power and economic policy.

Minister Le Maire pushes for the development of hydrogen 

Minister Le Maire continues to stress the importance of hydrogen, both for France's energy independence and for the climate, L’Usine Nouvelle writes. Speaking at the National Hydrogen Council at Bercy on 30 September, Le Maire said “we must move quickly” and “we must develop our industrial sites within weeks or months". Indeed, the Minister believes that hydrogen is one of the four pillars of the French energy strategy, alongside nuclear power, a reform of the European electricity market and the development of renewable energy. The Minister also noted that “nuclear energy is one of France’s assets” which must be consolidated, adding that “nuclear and renewable energy sources go hand in hand to ensure a successful green transition.” Minister Pannier-Runacher praised nuclear energy during an interview with RMC on 1 October, which allows France to have a cheaper electricity cost. She hinted at a possible construction of six new nuclear plants (EPR), possibly after the completion of the Flamanville nuclear power plant in Normandy. The State has invested €500 million in nuclear energy to reach carbon neutrality in 2050.

The article also notes that the €7.2 billion hydrogen plan presented in September 2020 remains “rather abstract” for many. Minister Le Maire reportedly told industrialists “we must see factories coming out of the ground in the coming months.” According to Bercy, €300 million of public investment has already been disbursed, and €1 billion for technologies in the coming months. About fifteen projects will benefit at the end of the year from the IPCEI (important project of common interest) dedicated to the sector. The government will invest €7 billion to develop “Green Hydrogen” or “low-carbon hydrogen”. The construction of a hydrogen plant will start in 2023. "Hydrogen is the industrial sector in which the State has invested the most", insists Le Maire, who promises that the issue will still be at the heart of the future France 2030 Investment Plan. The Minister believes that France, with its decarbonised nuclear electricity, its industrial specialists, aeronautical and railway industries can become a world leader in green hydrogen with a complete and integrated ecosystem. For Le Maire, the two main ecosystems that must emerge to embody the French ambition are located, around Belfort where McPhy's electrolyser mega-plant is planned for construction, and in Normandy with Air Liquide. The Minister of the Economy also invited industrialists to pursue cooperation "at full speed" with German partners, like the joint venture created between Air Liquide and Siemens.

French companies TotalEnergies, Vinci and Air Liquide seem to have taken a hint with a joint statement on 1 October announcing the launch of “the world’s largest fund dedicated to the development of clean hydrogen infrastructures", reports Les Échos. The fund aims to accelerate the growth of the hydrogen ecosystem by investing in major strategic projects. The companies involved have already committed to investing 800 million euros, "out of a target of €1.5 billion.” TotalEnergies, Vinci and Air Liquide will each invest €100 million in the project managed by Hy24, a new joint venture equally owned by Ardian, one of the world's leading private equity firms, and FiveT Hydrogen, a management platform specialized in low-carbon hydrogen projects. Foreign partners include the American hydrogen pioneer Plug Power, liquefaction specialist Chart Industries and oil services group Baker Hughes, as well as Korean chemical company Lotte Chemical. TotalEnergies, Vinci and Air Liquide also announced that Groupe ADP, Ballard, EDF and Schaeffler have indicated their intention to join the project as complementary partners. The fund, which should be operational by the end of the year, "will invest in the entire renewable and low-carbon hydrogen value chain, in the most promising regions of America, Asia and Europe. In total, it should be able to participate in the development of projects for "a total amount of about €15 billion", using debt and public policy support.

The Government’s €1.4bn plan to tackle long-term unemployment

On 27 September, Prime Minister Jean Castex and Employment Minister Elisabeth Borne presented their €1.4 billion Investment Plan for Skills (plan de réduction des tensions de recrutement). In an interview with Les Échosthe Prime Minister details the measures intended to make recruiting easier. The government will invest massively in training both the unemployed (5.9 million) and employees at time when recruitment difficulties are becoming increasingly widespread. The Investment Plan aims to train 1.4 million jobseekers by 2022. Of the €1.4bn mobilized for vocational training in 2021 and 2022, €900 million comes from unused emergency spending provisioned for 2021 (of this amount 600 million will come from the National Fund for Employment (fonds national pour l’emploi)). This amount will fund the training of 350,000 employees. The government will table an amendment to include this funding in the 2022 Budget Bill. As part of the Investment Plan, SMEs with 51 to 300 employees will receive €600 million to train employees.

Companies that recruit a long-term job seeker under a professionalization contract will receive €8,000. For long-term jobseekers, who now account for 50.3% of those registered with Pôle emploi (50.3%), the Prime Minister aims to "make it more attractive for adults to take out professionalization contracts (commonly known as alternance, split between training and paid employment) by extending the hiring stipend in 2022. Initially introduced in 2020 as part of the Social Cohesion and employment chapter of the 100bn stimulus plan. This €8,000 stipend those above 18 will thus be applicable to professionalization contracts for long-term job seekers. For young people (€5,000 for those under 18 years of age), it has been extended several times, most recently in early September until 30 June 2022.

The Prime minister’s priority is to have “strongest possible growth and jobs” by ensuring that “jobs are created and filled”. To that end, the he highlights the importance of the reform of unemployment insurance, “which will be fully implemented by 1 December”. With regard to pension reform, despite an improvement in the sanitary context, “the conditions set by the President” to implement the reform “have not yet been met”. Nevertheless, “this should not prevent us from working on this issue and preparing ourselves just in case”, concludes the Prime Minister. Regarding the future commitment income for young people, the Prime Minister explained that decisions are still underway, but that it remains necessary to fine-tune this scheme to ensure truly tailored support. The aim of the scheme is to support young people who are unemployed or without formal training, including school dropouts.

For Employment Minister Elisabeth Borne, France faces a real problem when it comes to matching skills with the needs of the economy. Dominique Seux, columnist at France Inter and editor of Les Échoswonders whether the problem lies in the skills-demand mismatch or in the appeal (or lack thereof) of jobs on offer (salary, working conditions, and career prospects). He stresses the importance of training as many jobs are appearing and others disappearing notably with the digital and green transitions. Seux regrets the “flop” of Transco, a scheme designed to support upskilling and retraining launched back in January 2021, owing to a low number of participants because of “administrative complexities”. Age remains a blind spot of the government, points out La Tribuneas most companies are reluctant to hire seniors. Those aged 55 or above are the first victims of long-term unemployment, remaining registered at Pôle emploi more than two years on average, twice as long as all the unemployed. France is one of the worst performers in the OECD when it comes to keeping people aged 55 and over in employment: with an employment rate for people aged 60-64 of about 33%, even though it has improved in recent years for 55-60 age group.

Platform Workers: from self-employed to employed?

La Tribune  wonders whether self-employed (indépendants) deliverers and drivers will become salaried workers after a Senate Committee raised the issue of the “presumption of salaried status” after conducting an inquiry on the status and working conditions of platform workers. The paper estimates the number of platform workers in France at a little over 200,000. The committee, launched by the CRCE group (Communist, Republican, Citizen and Ecologist) in the Senate, presented its preliminary findings on 21 September. Its conclusions are due this week as the National Assembly examines a bill ratifying a decree issued in April 2021 allowing platform workers to elect professional representatives at national level through the Authority of Social Relations of Employment Platforms (ARPE). This bill aims to structure social dialogue between workers and platforms.

Most French unions (UGICT-CGT, CFE-CGC, FO and UNSA) are in favour of granting platform workers the status of employee by contrast with the Government and two of France’s largest employee unions, CFDT and CFTC. Employment Minister Elisabeth Borne claims “platform workers do not want to be employees.” EU Affairs Minister Clément Beaune has previously stated that “platform workers such as Deliveroo couriers and Uber drivers should not be classified as employees” (see roundup 17/09). However, Beaune is in favour of EU level rules on this issue – as rules governing platform workers across the Union are fragmented. The European Parliament recently proposed a resolution on a directive introducing the “rebuttable presumption of an employment relationship”. The resolution specifies, “it is for the employer to prove that there is no employment relationship in accordance with national definitions as set out in the legislation or collective agreements of the respective Member State; whereas the rebuttable presumption of an employment relationship must not lead to an automatic classification of all platform workers as workers.”

All French unions and the European Trade Union Confederation (ETUC) do not want to create a new status. Most French unions see the establishment of a “presumption of salaried status” as the best way to protect workers. The "presumption of salaried status" would guarantee a certain number of rights for workers, including the right to paid leave and access to social protection, in case of illness but also of work accidents Platform workers are currently not covered in the case of work-related accidents. According to Force Ouvrière (FO), the third largest union in France, platforms should be seen as employers and platform workers should have a minimum wage. Minister Borne has agreed to include the issue of minimum wage included in discussions with social partners but remains firmly opposed to the “presumption of salaried status”. Borne deems better social protection should not go through changing the status of platform workers.

The ARPE decree has been criticized by unions owing to a perceived “lack of clarity” and “excluding any possibility of introducing a salaried status for platform workers.” The first election organised by the ARPE is due to take place in March 2022. This body has no regulatory role and will organize and supervise the future elections to rebalance the labour relations between the independent workers and the digital platforms. Funding for the ARPE will come from a “platform tax” as part of the 2022 Budget Bill, reports Les ÉchosThe tax will cover costs incurred by the ARPE estimated between €1.5 million and 2 million per year.” The tax will apply to all platforms offering transport and delivery services and will be based on the difference between the sums they collect and income paid to workers. The paper expects the financial impact to be “minimal” as the rate of compulsory levy will not change. The rate will be set early next year, when Bercy will have the data on the revenues generated in France by these companies. It will not exceed, in any case, 0.5%, adds the paper. By creating this new tax, Bercy is somewhat blurring the message it has carried since the beginning of President Macron’s mandate, notes the paper. As part of the "Public Action 2022" program, it has indeed set itself the objective of eliminating taxes that bring in very little revenue, as recommended by the Court of Auditors and the General Inspectorate of Finance. The 2022 Budget Bill notes the disappearance of four small taxes, which brings to 64 the number of levies suspended since 2018, for a total reduction of €730 million, according to the Ministry of Economy and Finance. The clearing of the tax code during the five-year period will also have allowed to get rid of 46 inefficient tax brackets.

Challenges facing French Tech over the coming years

In an interview with Les ÉchosSecretary of State for Digital Affairs Cédric O discusses the challenges ahead for French Tech and the appointment of Clara Chappaz as the new head of French Tech. Chappaz, former CEO of Vestiaire Collective (second-hand designer clothing), which raised €174 million last week, will replace Kat Borlongan at the head of French Tech. She will begin her three-year mandate on November 1, less than four months after Borlongan's departure. As an entrepreneur with international experience – she has worked in the US, UK and Thailand - and former business manager, Chappaz embodies what the government wants to make of French Tech, i.e., an ecosystem that performs well in France and internationally, but that is also geared toward women, currently lacking in the tech sector. Unlike her predecessor, Chappaz has no political experience. Her appointment is part of a takeover of the Mission French Tech by Cédric O's cabinet, a source of great tension under Borlongan, observes La Tribune.

O’s main objective is to increase the number of start-ups supported by French Tech and its flagship programmes (Next40, FT120, Green20, French Tech Tremplin) from 200 to 1,000 by the end of 2022 (out of a total of over 20,000 in France). The four programmes part of the French Tech Mission are Next40, French Tech 120, Green20 and Tremplin. Tremplin, which aims to make the digital environment more inclusive by supporting entrepreneurs from cultural and social diversity, will play a key role in this scaling up. This programme launched by Borlongan received €25 million over two years for its second edition compared to €15 million for the first, and will incubate 300 male and female entrepreneurs. French Tech 120 facilitates which relations between start-ups and government services such as Ursaff, Pôle Emploi, Bercy and Bpifrance, will extend to all regions. The goal is to reach more start-ups, rather than the largest ones. A recurring criticism of the French Tech was its focus on the growth of already established start-ups to the detriment of smaller ones.

For O, scaling up support for start-ups depends on the outcome of the next presidential elections. He believes that investing in start-ups is laying the foundations of France’s economic and industrial power for the next 50 years. In this sense, O and the current government see “start-ups as assets of our national sovereignty.” O is determined that French Tech’s efforts continue to ensure start-ups develop and remain competitive on international markets. This is also why he hopes Emmanuel Macron will run for his re-election, as “he is the only one who can look ahead and who understands that innovation and the success of French Tech are key to our international influence and economic prosperity, and part of the solution to challenges such as global warming.”

Other challenges include increasing the number of IPOs, training and attracting talent. On the subject of IPOs, O considers that this is the “last link in the chain” to ensure the development of French Tech. This is a key priority shared by with Bruno Le Maire. O and Le Maire ambition to make the Paris Stock Exchange the next European Nasdaq. O recalls that between 1997 and 2021, there have been two tech stock market listings in Paris worth over €1 billion: Dassault Systèmes and Worldline. In 2021, there will be at least two [Believe and OVH], which is as many as there have been in 25 years. O assures that the government is working on the regulatory environment - with Euronext in particular - and especially on the financing ecosystem to enable the emergence of global tech funds in Paris, specializing in technology stocks listed on NASDAQ or Hong Kong, but also on Euronext. O regrets that France still has too few. Training students, helping people change jobs if they want to, and move into sectors like coding, which are hiring massively, will be crucial. As part of the forthcoming investment plan, O and the Employment Ministry are working on training and upskilling. O emphasized the importance of the French Tech Visa, a simplified procedure for founders and employees of non-European start-ups to settle in France in order to attract international developers and other talents to France.

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