When a fire is starting, firemen are called. Once the fire is over, it is necessary to rebuild. It is at that time an architect is called. These two professions are indispensable, the one as the other. It is the same to make a country exiting from the major economic crisis provoked by the corona virus pandemic. All the states have tried to limit the economic and the social consequences of the measures taken to fight against the propagation of the outbreak. This one being, according to a general opinion, on the way to remission, not to say disappearance, it is necessary to go to the next step, to repair the damages and to rebuild an economy about which some are maintaining, with an peremptory tone, that it will be different from the “previous world” but without bringing the proof that both objectives are compatible.
The rescue effort has been huge. The government has just approved, in the Council of Ministers, a third amended finance bill after these promulgated March 23rd and April 25th. This succession of bill is unprecedented and shows the encountered difficulties to assess the consequences of the outbreak and to remedy to them through undertaking charges or offering guaranteed loans to economic agents whose activity has been interrupted. Payment delays related to fiscal and social charges have also been granted as direct transfers to household and most affected enterprises to which will be added the promises made notably to medical staffs as gratitude of their essential role and their commitment. The forecasted deficit of the social security system is estimated about 50 billion euro.
As a total, public finances deficit for the 2020 year would overpass 10% of the GDP, i.e. more than 300 billion euro. Until now, the State doesn’t find any problem to finance it. Treasury Bonds and OAT have a growing success without creating an interest rate rise. Since the beginning of the year, the average rate of the issuances has even been slightly negative. The State and the public administrations will not be confronted in the coming years to an increase of the debt charges which would remain, for the State, under 40 billion euro. These low rates are not only caused by the massive buying program of public bonds by the European Central Bank. They result also from investor faith, from the very high household saving rate and from an inflation which is also near zero. In April, year on year, it has been only 0.2%.
So the fireman-State did a good job. The consequences of the activity deep fall during the lockdown period have been mastered. The massive recourse to part-time unemployment, financed by the State has allowed, especially in the industry, to keep inside enterprises the know-how which will be indisputable when the bounceback comes. Even if the number of new jobseekers has over passed one million during these last two months, we are far, as an example, from the numbers seen in the U.S. or in Southern Europe. But no reconstruction will be possible if the foundations are not guaranteed. So the priority now is to reestablish faith. The State has, at its disposal, a strong selling point: the pandemic has been mastered and the experience can be used in the future if a second wave occurred. So the State mission will change now and it will have to precise which kind of reconstruction it intends to inspire and support. Its success depends of the clarification of its action. Unfortunately the first orientations are generating skepticism.
The rebound capacity first depends from the situation the economy was at the verge of the crisis. The China example is interesting. The country having been hurt sooner, it is logical it was in advance in the recovery. Industrial production had fallen by 8% during the 1st quarter with a peak at -13.5% during the first two months. In April, production rebounded by 3.9%. Foreign exchanges volume has recovered during this month the level reached a year before. Fiscal receipts had fallen by 35% in January and February. In March, the fall is only 15%. Urban unemployment rate, after having reached 6% came back around 5%. At last power generation, which was growing at a 5.6% rate during 2019 1st quarter, fell only by 4.7% during the first four months of the year. As a total, according to the World Bank forecast, China would be the only country among the major economies to have a positive growth (1%) in 2020. The strength of the Chinese economy before the crisis has not been without consequences on its rebounding capacities.
It is not possible to say the same about France and it is that the architect-state must take into account. The country was already in a near recession situation before the outbreak under the combined effect of the economy structural weaknesses and the social unrest provoked by the deep discontentment generated by reform projects which were under discussion. These projects had created a climate causing anxiety with negative consequences for growth. Nothing allows maintaining that today these projects are abandoned. The two major industrial plans, regarding the car industry and aeronautics are targeted to protect these two essential industrial activities but the announcements on their future orientations are puzzling because they are highly hypothetic.The electric vehicles customer attraction is doubtful. Regarding aircrafts with zero carbon emission, nobody can be sure they constitute the future of the branch. To finance some thousands jobs to make the necessary research with, as an objective to have results in 2035 isn’t, in any case able to allow the industry to have a short-term rebound. The actions in favor of tourism and air transportation must also be amplified because the tomorrow world will not be a world where everybody will stay at home.
France has been more hurt than other countries due to the de-localizations employed by its companies. April foreign trade figures show the extent of the problem. During the heart of the recession and when fossil fuel prices were at their lowest level, the deficit has over passed 5 billion euro, as if crisis had never existed. Exports have fallen (-35%) more than imports (-25%). The only region where imports have not fallen was Asia (6.7 billion) and it is with that region that the deficit (-3.2 billion) is the highest. The support to enterprises must be conditioned by major strategic changes from them. The reconstruction must include a revision of our energy policy. The stigmatization of the nuclear power must belong to a past period. The closure of Fessenheim plant for purely political motives is a non sense, especially when we see that Germany, not far from the plant site, at Dattelm, has just inaugurated a new coal-fired power plant. Hesitations regarding the modernization and the progressive renewal of our nuclear power stations must stop. The supports to the energy renovation, to isolation and conversion to electric heating must be, at last, adapted to the situation of occupants, whatever they are tenants or owners or if they are flats or houses. Hundreds of thousands jobs could be created in these activities and they will allow to regain faith to economic agents in a much more efficient manner than with announcements effects of billion which could maybe never been spent.
It is possible to be a good fireman, especially when the used tools are consisting in drawing on cash or through borrowing on the markets. It is much more difficult to be a good architect. It is to this challenge the State is confronted today.