France lifts pandemic response to 136bn euros

PARIS: France raised its coronavirus response measures to nearly 136 billion euros ($154.6 billion) on Wednesday, bringing the cost to 5.6pc of GDP in its third budget revision so far this year.

The government had put the cost at 110 billion euros in April but has since had to make upward revisions to take account of falling tax revenue and extra spending, it said in its budget update.

President Emmanuel Macron's government now expects the euro zone's second-biggest economy to contract 11pc this year, which France's independent fiscal watchdog described on Wednesday as "cautious" despite being the worst slump since at least World War II.

The government put France under one of Europe's most stringent lockdowns from mid-March and only began lifting restrictions on May 11, shutting down vast swathes of the economy.

Companies have put more than 13 million workers on state-subsidised furloughs at a cost the government put at 31 billion euros in the revised budget, shouldered two-thirds by the state and the rest by unemployment insurance.

The government has also deferred billions of euros in tax and payroll charges and mobilised 40 billion euros in state aid, tax breaks, loans and guarantees for the tourism, automobile, tech and aerospace sectors.

With tax revenue falling fast, the government now expects an unprecedented public sector budget deficit of 11.4pc of economic output this year, revised up last week from 9.1pc in April.