Posted by Cédric Audenis (France Stratégie), Vincent Aussilloux (France Stratégie), Haithem Ben Hassine (France Stratégie), and Paul-Armand Veillon (Inspection Générale des Finances)
The French government spent more than 225 billion euros between March 2020 and June 2021 to support businesses affected by the COVID-19 crisis. This amount included more than 60 billion euros in subsidies for partial unemployment schemes and to compensate operating losses for small and micro businesses through a so-called Solidarity Fund.
Against this backdrop, the French Parliament established as early as March 2020 a committee to monitor and evaluate the spending of these huge resources. This Committee, chaired by a former member of the Governing Board of the European Central Bank, Benoit Coeuré (hence the « Coeuré Committee ») brought together members of Parliament, representatives of employers and trade unions, local elected officials as well as representatives of government organizations and of the Supreme Audit Institution (Cour des Comptes). Its purpose was to monitor the support measures rigorously and transparently, based on feedback from actors in the field, exchanges between stakeholders, and technical analyses led by the Committee’s Secretariat.
The Committee submitted its final report in July 2021, after publishing an interim report in April 2021 and making available in real-time data on the take-up of the various measures. The findings centered on the four main support measures (partial unemployment schemes, the Solidarity Fund, guaranteed loans, and postponement of some social contribution and tax payments). The Secretariat of the Committee - led by the government think-tank France Stratégie and the General Inspectorate of Finance - focused its work on two areas: first, a comparison of the French situation and support measures to other countries in Europe and, second, an in-depth analysis of the actual implementation of the support measures.
The work carried out by the Secretariat took account of the size of the businesses, their activities, the intensity of the shocks they had to weather, as well as their pre-crisis characteristics. The Secretariat also assessed whether businesses had benefited from one or several support measures, and the impact of these various measures on post-crisis business outcomes.
This analysis drew on a huge database of the 3.5 million businesses that benefited from support. These data allowed the Secretariat to make assessments, sometimes through microsimulations, of how the measures were targeted and to what extent they covered the losses incurred. These first assessments may be completed at a later stage by academic studies, the whole database being made available to researchers.
Drawing on the lessons of a benchmarking exercise led by the Secretariat in partnership with the French Treasury, it appears that France is in an average position compared to other European countries with respect to the overall economic impact of the COVID-19 crisis. France is also close to the European average with respect to the overall amount of emergency support measures but implemented a more diversified array of measures. Distinctive features of the French support measures include (i) the low interest rate in the first year of the guaranteed loans, (ii) a more favorable scheme for compensation of partial unemployment both at the lower and at the higher end of the wage scale, and (iii) a massive expansion from the last quarter of 2020 of expenditures by the Solidarity Fund, initially very restrictive.
The hospitality sector and very small enterprises (less than 10 employees) have been among the main beneficiaries of support measures. Making up only 5 percent of salaried employment, the hospitality sector had received (by end May 2021) 23 percent of expenditure of the partial unemployment scheme and 37 percent of the Solidarity Fund. Very small enterprises (making up 18 percent of employment in the private for-profit sector) made up 63 percent of claims on the Solidarity Fund, 33 percent of partial unemployment and 29 percent of guaranteed loans. Businesses in average financial health benefited most from the measures, while businesses already in difficulty before the COVID-19 crisis (so-called “zombies”) did not receive disproportionate support.
Subsidy measures were primarily targeted towards businesses most affected by the crisis, especially during the COVID-19 second wave (starting in the 4th quarter of 2020). Businesses experiencing a loss of 40 percent or more in turnover in 2020 compared to 2019 made up only 11 percent of employment but received 67 percent of total subsidies. Similarly, businesses that were most affected by a loss in gross operating profit were also substantial beneficiaries.
Overall, the Committee’s July 2021 report stated that “support measures seem to have reached their goals” and that their implementation deserves an “overall positive assessment”. The measures were “broadly sufficient to preserve the financial health” of most businesses based on an analysis of macroeconomic data and initial financial and accounting data from the affected businesses. The Committee nevertheless underscored the presence of “real but moderate windfall effects”, with some businesses having been overcompensated for their losses in gross operating profit.
The methodology and institutional arrangements used by the Coeuré Committee will be replicated in an upcoming assessment of the French post-COVID recovery plan, with a first report expected in October 2021.
A French translation of the article is available on the following link.
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