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According to Euler Hermes, the French and Italian fiscal stimulus plans will stimulate economic growth

Euler Hermes analyses the French and Italian stimulus plans (photo: Eurler Hermes)
Euler Hermes analyses the French and Italian stimulus plans (photo: Eurler Hermes)
FRANCE / ITALY. According to a study by Euler Hermes, published on Thursday 3 September 2020, the fiscal stimulus plans unveiled by France and Italy are heading in the right direction. The French credit insurance company (owned by the Allianz group) estimates that they will enable Paris to stimulate its economic growth by +2.4% between now and 2021-2022 (compared with 4 points forecast by the government) and by +0.7% for Rome over the same period.

France has adopted a two-year €100 billion recovery plan, representing 4.3% of its GDP, with €30 billion for green growth, €35 billion for industrial competitiveness and €35 billion for preserving social and territorial cohesion. Presented in detail on Thursday 3 September 2020 and already unveiled in the summer of 2020, it is judged by Euler Hermes analysts to be "balanced, with one third of the effort focused on employment and demand in the short term and two thirds on medium-term measures concerning productive investment and ecological transition".

On the other hand, the study shows that, for France, "because of our structural dependence on imports, the downside of this fiscal stimulus will be the worsening of the already high trade deficit". Euler Hermes estimates that it "could widen by around €12 billion under this plan compared to €3 billion for Germany for an equivalent economic stimulus". Italy would benefit from an additional trade surplus of €1 billion.

On the other hand, the measures announced on production taxes and equity capital to help companies get through this crisis would not be sufficient "to stem the shock of business failures". The analysis predicts a 25% cumulative increase in bankruptcies over 2020-2021. Euler Hermes is also concerned about the training component, which "risks defaulting".

Frédéric Dubessy

Thursday, September 3rd 2020

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