Stimulus boost for confidence in France and Germany

Business confidence is slowly building in Germany and France with French Finance Minister expecting their economy to rebound to pre-covid levels by 2022
Stimulus boost for confidence in France and Germany
French Finance Minister Bruno Le Maire. Picture: Ian Langsdon, Pool via AP

Surveys showed consumer and business confidence in France and Germany growing as coronavirus lockdowns are eased, bolstered by generous stimulus packages and declining infection numbers in Europe.

A temporary cut in Vat in Germany, which will cost the government up to €20bn, helped push up consumer morale there more than expected heading into August, the latest data showed.

In France, business confidence gained further ground in July. 

The INSEE official statistics agency said its business climate index rose to 85, from 78 in June.

That is still far from the 105 recorded in February, before the pandemic, but much better than the record low of 53 reached in April as measures to halt its spread shuttered businesses and kept consumers at home.

The news comes as the European Parliament holds a special session to discuss the EU leaders’ accord on a massive stimulus package which countries hit especially hard by the coronavirus hope will help rekindle their economies.

Finance Minister Bruno Le Maire said France’s economy was on course to rebound by 8% next year and should return to pre-crisis levels by 2022.

But he also warned that while recent economic data were satisfying, the situation was still “too fragile” to prompt a change to forecasts for an economic contraction this year of 11%, the worst in modern times. 

France will also help state-owned railway company SNCF survive the coronavirus crisis by providing several billion euros, Transport Minister Jean-Baptiste Djebbari told daily Le Figaro. 

The government would help the company through a capital hike or an additional debt buy-back, Mr Djebbari also said.

“SNCF has no cash flow problem. However, the state will help it by several billion euros,” Mr Djebbari said.

He also said the government would expect in return a “high-level of economic, environmental and social performance” from SNCF.

Separately, he told France Info radio that the state also planned to boost rail freight in the country.

“Rail makes 9% of goods transport, we want to double that to 18% by 2030,” he said. Meanwhile, Rolf Buerkl, a researcher at Germany’s GfK institute, said its data showed consumers were increasingly of the impression that the German economy was likely to recover soon and were using the opportunity of the Vat cut to make major purchases.

The consumer sentiment index, published by GfK and based on a survey of around 2,000 Germans, rose to -0.3 heading into August from a revised -9.4 in the previous month.

This was the third monthly increase in a row and beat a Reuters forecast for -5.

But Mr Buerkl warned that any fresh wave of coronavirus infections and renewed lockdowns “would quickly shatter any hope of economic recovery”.

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