France delays launch of $118b plan for virus-stricken economy

The French government said on Saturday that it will unveil a week later than originally planned a 100-billion-euro ($118 billion) plan to nurse its coronavirus-stricken economy back to health.

Businesses had eagerly awaited details of the new shot in the arm for the eurozone’s second-largest economy, trailed for August 25, and government spokesman Gabriel Attal said it was “ready”.

But for now “the government is completely mobilised to prepare for the health deadline” of September 1, when pupils return to school and many workers will be back from summer holidays, Attal said in a statement.

Groundwork must be laid, including a nationwide requirement to wear masks in workplaces and secondary schools, he said, adding that President Emmanuel Macron wants ministers working “to make sure these measures are applied properly and allow everyone to adopt them”.

Only then will the economic plan be presented “in the first week of September”.

Paris is sticking to its aim of returning French GDP to the same level as before the coronavirus pandemic by 2022, Attal said.

Fears have been growing in recent days that France could be struck by a second wave of the virus, as official figures showed the number of newly-detected cases had mounted to almost 4,600 in the 24 hours to Friday.

But numbers of people hospitalised or in intensive care with the COVID-19 disease have remained relatively stable despite the increase in infections.

Economic activity in France ran at 7% below normal levels in July, a slight improvement on June, as the construction sector neared pre-coronavirus crisis levels of activity and industrial capacity usage nudged higher, the Bank of France said.

In its monthly update on business conditions, the central bank said recently the eurozone’s second biggest economy contracted 13.8%, in line with its forecast.

“The rebound continued in July, at a more moderate rhythm, in line with the trajectory anticipated last month,” the bank said.

In June, economic activity was 9% below normal levels, up from the 32% reduction seen during the first two weeks of lockdown in March.

The positive trend continued just as France and other European governments took new measures to curb a renewed rise in infection rates, desperate to avoid a return to the lockdowns that battered economies globally.

In the manufacturing industry, capacity utilisation in July rose 3 points to 72%.

Manufacturing and service sector activity would be stable in August, the bank projected.

The European economy’s rebound from the coronavirus recession slowed in August, as a pick up in new confirmed cases appeared to hobble the reopening of some businesses and travel from their near-complete shutdown in the spring. An indicator of business activity by research firm IHS Markit fell back to a level that suggests the economy is barely growing after a relatively strong burst in July, when many countries had phased out the restrictions on public life that were imposed in the spring to contain the pandemic.

The purchasing managers’ index, which is based on a survey of 5,000 companies across the 19-country eurozone, dropped to 51.6 points in August from 54.9 in July. The 50-mark separates economic contraction from growth.

The economy’s drop in momentum coincides with an increase in virus cases in some European countries that is forcing governments to put limits on travel again and to reimpose new lockdown restrictions on some communities. Airlines have said the trend has hurt a recovery in travel in Europe as the news saps consumer confidence.

Companies are cutting jobs for a sixth consecutive month, though not by as much as in April, with layoffs biggest in the manufacturing sector.

Experts say the outlook for the economy is closely tied to the number of reported coronavirus cases and whether a second wave of outbreaks will keep schools from reopening and restrict shops, restaurants and other businesses from operating.

“The path taken will likely depend in large part on how successfully COVID-19 can be suppressed and whether companies and their customers alike can gain the confidence necessary to support growth,” IHS Markit economics director Andrew Harker said.

The euro, which hit two-year dollar highs this week on the US stimulus deadlock, fell back heavily on Friday as data showed eurozone economic activity slowed in August against a backdrop of rising coronavirus cases.

“The euro’s rally has come to a halt this week on growing concerns that coronavirus is coming back strongly in parts of Europe and will hurt the economic recovery,” noted Fawad Razaqzada, market analyst with ThinkMarkets.

“In fact, economic activity has already slowed down according to the latest Purchasing Managers’ Indices from Germany and especially France, where COVID-19 cases have risen sharply since July.” Core European government bond yields fell further on Friday, with Germany’s 10-year Bund rate pushed back to -0.5% against the backdrop of rising COVID-19 infections and a faltering economic recovery.

Agencies