France’s Le Maire: We will be EU’s first green economy by 2040

“The [inflationary and energy] crisis is behind us; times of reconquest are ahead. We are getting back on track with our economic policy,” Le Maire told journalists and entrepreneurs on Thursday during a visit to the French-owned kitchenware factory Fournier.

In a much-anticipated speech, the minister set out a series of economic priorities necessary to both balance the books and provide leeway for investments in industry decarbonisation and innovation, amid three years of a pandemic and energy shocks that saw public debt and inflation explode.

“Our economic results are bulletproof,” he told entrepreneurs, claiming the French economy had performed better than that of Italy, Germany and Spain since 2017, while over 2 million new jobs were created.

Sticking to “supply-side politics” was the right way forward, Le Maire contended, refusing to head down any other policy road. “Hammering down businesses and citizens with tax, for greater redistribution? Certainly not”.

Slashing public spending

France is one of the most indebted EU member states, topping 111.6% of GDP by April 2023, relative to a euro area average of 91.6%. The deficit also sits at 4.7% of GDP, far beyond the 3% threshold enshrined in EU treaties.

“Accelerating” the reduction of debt levels is Le Maire’s top priority – the minister aims to bring it back down to 108.3% by 2027. On Thursday, he announced €5 billion worth of public spending cuts to meet those targets, including a total end to the gas and electricity ‘shields’, first implemented at the start of the war in Ukraine to cap energy prices.

Le Maire also announced the removal of a current tax break that triggers when buying property for the sole purpose of renting. Several media reports also claim work is underway to close off tax breaks that favour ‘brown’ practices, such as lower tax levels for taxis’ fuel purchases.

Finally, in an effort to “ensure everyone pays the State what they owe”, work will be ramped up to curb ‘social’ and tax fraud. A government plan first presented in May had however raised fears it was not going far enough, avoiding any serious discussion of how to tackle tax havens.

Meanwhile, the minister confirmed there would be no tax increases. A set of specific production taxes, for which France has one of the highest levels in the EU, are slated to be slashed by 2027.

Lowering debt levels “requires difficult and courageous decisions, and the government must be exemplary in that regard”, Le Maire said.

Green industry

Le Maire also confirmed the country’s ‘Green industry’ bill would be implemented as soon as possible, once adopted by Parliament.

The piece of legislation will look to support the creation of new sites in the sectors of green hydrogen, batteries, wind power, heat pumps and solar panels, as well as setting measures to decarbonise existing plants, including through a dedicated €500 million tax credit.

The bill also intends to reroute some of the French population’s savings into green projects by creating a new tax-free ‘climate future savings plan’, with more advantageous interest rates than existing state-backed plans.

This should come with new training programmes geared towards the green industry, while labour market and unemployment reforms are due to continue in order to reach full employment by 2027.

“We have become the nation of possibilities [and] must carry a collective ambition over the long run: become the first EU green economy,” Le Maire touted.

As for industrial sectors deemed critical and strategic, the minister announced he would “broaden the sectors that fall into the scope of [foreign investment] controls, especially critical raw materials’ extraction and transformation activities”.

France adopted a law in 2019 to more effectively screen foreign investments in economic sectors deemed critical to public order, national security and defence. Where restrictions apply, investment flows must first be approved by the Ministry of Economy.