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France vows 45 bn euros for economic 'war' on coronavirus

Tuesday March 17 2020
eiffel-pic

The Eiffel Tower in Paris, France. French President announced suspension of utility bills, rent for small businesses struggling amid coronavirus. FILE PHOTO | BERTRAND GUAY | AFP

By AFP

Paris

France has suspended rent and utility bills owed by small companies to help them weather the economic storm caused by the coronavirus outbreak.

On Tuesday, the country pledged tens of billions of euros in financial aid and mooted the nationalisation of large companies to wage an "economic and financial war" on the coronavirus which has sent most of the country's workforce into lockdown.

Finance Minister Bruno Le Maire announced a 45-billion euro ($50-billion) aid package to help businesses and employees cope with the escalating health crisis and brace for a recession.

"This war will require us to mobilise all our forces," the minister said, and warned the fight "will be lengthy, it will be violent".

"I will not hesitate to use any means at my disposal to protect large French enterprises," added Le Maire -- citing capital injections, stake purchases, and even "nationalisation if necessary".

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The government said France's national debt will exceed 100 per cent of GDP this year, well above the European Union's guideline of no more than 60 per cent.

And GDP will contract by an estimated one per cent, a dramatic reversal on pre-virus projections of 1.3 per cent growth for 2020.

Budget Minister Gerald Darmanin told daily financial newspaper ''Les Echos'' the public deficit will likely grow to 3.9 per cent of GDP. The government had hoped to shrink it to 2.2 per cent.

The economic hit of the coronavirus, which saw the government confine most residents to their homes starting Tuesday and closing all non-essential businesses, comes hot on the heels of a damaging public transport strike which lasted weeks and hurt the earnings of small businesses in particular.

Le Maire said the new aid package will include 32 billion euros for cancelled or deferred taxes and social charges of companies plunged into difficulty by the unprecedented health crisis.

Paying the salaries of people forced to give up work under the containment measures will cost another 8.5 billion over two months.

"If we put this much money on the table it is to aid (the economy) to restart quickly" once the outbreak recedes, said the minister.

Several companies have already warned of tough times ahead.

Air France said on Monday it would slash flight capacity by 70-90 per cent over the next two months and expected its financial situation to be "badly impacted".

Carmakers Renault and PSA Peugeot-Citroen, and tyre maker Michelin have closed factories in France, and Airbus has suspended some production in Europe -- now the epicentre of the epidemic that started in China.

For small- and micro-businesses and self-employed entrepreneurs, Le Maire said two billion euros would be set aside in a "solidarity fund" to help those that lose 70 per cent of their turnover between March 2019 and March 2020.

France's markets regulator on Tuesday banned short-selling in 92 stocks for the day in a bid to tame the fierce volatility on financial markets as nervous investors try to assess the virus' economic toll.

Targeted were stocks that were especially hard hit when a global sell-off saw Wall Street plunge nearly 13 per cent on Monday.

Short-selling involves borrowing shares to sell them, effectively betting their price will fall so they can be bought back cheaper, allowing the investor to pocket the difference.

The practice can put immense downward pressure on prices at times when buyer interest is virtually non-existent.

Le Maire said he was prepared to impose a short-selling ban of up to a month if necessary.

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