Exclusive: France to hike crisis response by 10 billion euros to 110 billion – sources

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(C) Reuters. The Champs Elysees avenue in Paris as a lockdown is imposed to slow the rate of the coronavirus disease in France

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PARIS (Reuters) – The French government is set to raise the total amount of its crisis-response package by 10 billion euros ($11 billion), the second increase in days, when it updates its 2020 budget on Wednesday, two financial ministry sources said.

The government more than doubled the expected cost to 100 billion euros last Thursday, but extending a nationwide lockdown means that sum is already out of date and the new revision shows how the costs of bailing out the economy are ballooning.

“We’re at about 110 billion (euros),” a finance ministry source told Reuters. A second finance ministry source confirmed the amount.

About half the package of measures is made up of deferred corporate tax and payroll charges and the rest covers cash handouts for small firms on the brink of collapse, state-subsidised furloughs and funds earmarked for recapitalising big groups struggling to survive the crisis.

French President Emmanuel Macron said on Monday that a nationwide lockdown originally due to last until Tuesday would be extended at least until May 11, rendering the government’s economic and financial outlook outdated.

Finance Minister Bruno Le Maire said the extension meant that a budget update to be presented on Wednesday would now include a forecast that the economy will contract by 8% this year instead of the -6% estimated last Thursday.

The extension will put additional pressure on the public finances, with lost tax revenues now budgeted at 43 billion euros compared with 37 billion euros last Thursday.

Le Maire also said the extension meant that the state-subsidised furlough programme was now expected to cost 24 billion euros compared with 20 billion flagged last week.

As a result, France’s overall public sector budget deficit is set to swell to a post-war record of 9% of GDP this year, budget minister Gerald Darmanin said — three times the usual ceiling for European Union countries.