France has been hailed as the global star of the Covid pandemic by a Nobel Prize-winning economist for its unique strategy to overcome the crisis.
Professor Emeritus of Economics and International Affairs at Princeton, Paul Krugman, particularly praised France’s efforts to maintain employment and provide childcare.
His words were supported by French and British economists who said The connection that France has made the right choices to keep its economy strong in the face of the challenges of Covid-19.
Dr. Krugman, in The New York Timeshailed France as doing arguably better than any other advanced economy in limiting the economic damage caused by Covid.
The country has been particularly successful “surprisingly well” in keeping the percentage of prime-age people (25-54) in employment, he said.
He had not only avoided the “big dive [in employment]which was observed in the United States – although it has since partially recovered – but had exceeded pre-pandemic levels.
The key had been corporate subsidies to keep furloughed workers on the payroll, he said.
“It kept workers in touch with their employers and made it easier for them to return once vaccines were available.”
At the same time, its universal childcare provision, which reopened fairly early in the pandemic, as did schools, helped free up parents to return to work, Dr Krugman said.
His view echoes that of French Finance Minister Bruno Le Maire, who told MPs in December that the country had the best economic figures in the euro zone, adding: “We are back to activity levels of before the crisis three months earlier than expected”.
GDP had returned to 2019 levels by the end of last year, according to INSEE.
Xavier Jaravel, associate professor at the London School of Economics, agreed that the economic situation looked good for France.
The “whatever it takes” strategy
“The response to the crisis was strong enough to keep GDP from falling and not rising again,” he said.
He acknowledged that a key part of that decision was President Macron‘s decision to help companies keep employees on temporary layoff.
“It was the right decision, even though the ‘partial unemployment’ payments cost 35 billion euros during the shutdowns,” he said.
France says its Covid support measures cost 240 billion euros at the end of last summer. President Macron’s measures have helped increase France’s debt by 20%, to 116% of GDP.
Prof Jaravel said this could pose challenges in coming years to manage the debt.
He did not expect austerity measures to be imposed, as government revenue would rise as economic recovery continued.
Xavier Timbeau, director of the French Economic Observatory, said: “Krugman makes the French social system the pillar of his argument.
“But it was the ‘whatever it takes’ strategy put in place during the crisis that made the difference compared to other countries.
It was a calculated risk that paid off. However, the Governor of the Banque de France issued a note of caution, saying France cannot afford further tax cuts or spending at this stage.
Unemployment down to 7.5%
France’s economic performance has been good for several years now. Since 2017, when Mr Macron took office, more than 143,000 jobs have been created by foreign investors in 5,300 projects, according to Business France, a government agency that helps foreign companies set up shop.
In January, at the annual Choose France summit, foreign investors including Ikea and Pfizer confirmed another 21 major projects worth more than €4 billion, creating 10,000 new jobs. The Elysée indicates that half of them will be around towns with fewer than 20,000 inhabitants.
Read more: Ikea, Pfizer, pet care: France confirms 4 billion euros in new foreign investment
According to INSEE, investments in France are higher than before the pandemic and unemployment is down to 7.5%.
Read more: Macron promises up to €500 to young unemployed people who agree to train
This is two points less than when Mr. Macron took office. Another victory for Mr Macron at Choose France was the news that the country now has 25 “unicorns” – start-ups worth a billion dollars that have not yet been made public – three years sooner than he had promised (see below).
There were nine when he joined in 2019. Investments come mainly from mega-funds outside of Europe.
Mr Macron plans to use the six-month French presidency of the European Union, currently underway, to push for European funding for start-ups, with the aim that by 2030 there should be 10 giants European technologies worth more than 100 billion dollars.
He said there would be more announcements about this in the coming weeks and it was related to Scale-up Europe.
This initiative, launched by the French Minister for Digital Affairs and the European Commissioner for Innovation, brought together “scale-ups” – former start-ups that have become leading international technology companies – with researchers, investors and other private and public sector leaders.
It offers ideas on how to access talented people and funding, how start-ups can collaborate with large corporations, and how to develop breakthrough new technologies.
Initially announced by Mr Macron more than a year ago, his recommendations are due to be passed on to the EU this year.
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