Fiscal Policy

*Eek - this is over 250 words..*

Example 1:

On March 12, 2020, French President Emmanuel Macaron announced tax relief measures for French businesses affected by the surging Covid-19 pandemic. This expansionary fiscal policy protected companies by allowing them to defer the payment of taxes (corporate income tax, monthly social security contributions, as well as value added tax and taxes on wages) due in March of 2020 without formalities or penalties. Companies suffering at the most extreme level could also benefit from the postponement of social installments, tax installments, and even tax rebates. However, since there were only a limited amount of tax rebates available, they had to be issued on a case-by-case basis. This proved to be a challenge since the requirements to apply for this benefit were rather vague ("companies threatened with disappearance"). 

Those in favor of this policy would have been the stakeholders whose companies were experiencing negative impacts from the pandemic. They would benefit from the measure because it would give them more money available to use for consumption, which could increase aggregate demand (and increase national GDP). However, there could have also been company owners against the fiscal policy because it was proposed in a relatively subjective manner. Also, stakeholders against this policy might been those who didn't realize how long the pandemic was going to last. Since this measure was put into place during the first month of Covid, they could have argued that the time lag for fiscal policies would make it pointless (they wouldn't have realized how long Covid would last). Also people with fiscally conservative beliefs would be against government expanding beyond its means. 

Example 2: 

As of April 7th, 2021, France led the charge for fiscal stimulus in the European Union. There was great frustration regarding the length of time it has taken to implement the European Union's $750 Euro-billion recovery plan to counter the negative impact of the pandemic. The leader of the French fight, French Finance Minister Bruno Le Maire, says that regaining a strong economy and remaining in the technology race with the US and China requires investing right now. Tension grew stronger once Joe Biden's $1.93 trillion fiscal plan, which was approved eight months prior the European Union recovery plan, was already dispersed. The EU's fiscal policy poses ambitious plans for structural reform which could have contributed to its lengthy implementation. 

There were a variety of opinions regarding this policy because it included all the countries within the EU. The most prominent advocates for this quick European recovery plan were those who compare France nation to the US and China and who wish to remain in the technological race (Le Maire and European Central Bank Officers). Netherlands and Denmark, on the other hand, were more reluctant because it tied them to states with weaker finances. Germany had some issues with the plan's ratification, likely because of they had a fiscally conservative president at that time. Also there are countries who want to apply to old rules which limit budget deficits and GDP debt countries can undertake.

Government Debt and French Policies

France has been in extreme debt for nearly four decades, and their debt is predicted to continue climbing subtly for the next four years. It is evident that they are facing an accumulation of budget deficits, which is likely a result of implementing expansionary fiscal policies. For example, there is a jump in national debt between 2019-2020 due to Covid which demonstrates how France's willingness to stimulate the economy came at the risk of increasing national debt. With a national debt-to-GDP ratio as high as their current levels, the country is at risk of economic instability and financial crisis. The government is likely hoping Covid will disappear asap so that companies can operate at a maximum level/full employment, consumption can increase, and they can implement debt-reducing policies (raising taxes, etc). 

Works Cited

“France: Tax Relief for BUSINESSES, Coronavirus.” KPMG, KPMG, 13 Mar. 2020, home.kpmg/us/en/home/insights/2020/03/tnf-france-tax-relief-available-for-businesses-affected-by-coronavirus.html.

Horobin, William. “France Is Revving Up the Campaign for Fiscal Stimulus in Europe.” Bloomberg, Bloomberg, 7 Apr. 2021, www.bloomberg.com/news/articles/2021-04-07/france-is-revving-up-the-campaign-for-fiscal-stimulus-in-europe.

“Five Charts on France's Economic Outlook.” IMF, 23 July 2019, www.imf.org/en/News/Articles/2019/07/18/na071819-five-charts-on-frances-economic-outlook.

O'Neill, Aaron. “France - National Debt in Relation to Gross Domestic Product (GDP) 2026.” Statista, 4 May 2021, www.statista.com/statistics/270357/national-debt-of-france-in-relation-to-gross-domestic-product-gdp/.