Macron Sets Out Plan to Accelerate French Industrial Revival

(Bloomberg) -- French President Emmanuel Macron unveiled measures to spur a reversal of the country’s industrial decline as he seeks to respond to massive US aid for its green sectors and rebuild his political fortunes at home.

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Pledges include an expanded use of tax credits for investment, streamlining procedures to open new factories, and boosting financing in education and training. He also said the government will change bonuses for electric vehicles to exclude those produced with a large carbon footprint, a measure that would support European production.

“The battle for reindustrialization is key on an economic level, it is key on a geopolitical level, and it is key on a political level for the unity of the nation,” Macron told business leaders and lawmakers gathered at the Elysee Palace in Paris on Thursday. “We must accelerate and go much further.”

The French leader is trying to reset his presidency after a politically damaging fight over changes to the pension system that has highlighted huge opposition to his pro-business economic agenda and raised questions over whether he can continue to push through reforms.

The initiatives aim to tackle France’s long-standing industrial weakness, which has seen it sink further behind European Union peers. The weight of manufacturing in the EU’s second-biggest economy has slid to 10%, compared with more than 20% in Germany.

The government is concerned the US Inflation Reduction Act could exacerbate those difficulties by luring investment away from Europe with the promise of bigger subsidies.

Some of the measures will be presented in a so-called Green Industry bill next week, while others affecting public finances would be included in the 2024 budget bill. The Finance Ministry has said the net cost of the changes must be zero, with any new spending — such as tax credits — being financed by cuts elsewhere.

According to Macron, making full use of new European rules to create a green industry tax credit would fuel €20 billion of investment in France between now and 2030, and reduce imports of strategic components. Combined with the firepower of other industrial investment programs, France will be able to rival the US’s IRA, he said.

Changes to car subsidies to benefit vehicles with a low carbon footprint are expected to be finalized in the coming months. While the new rules would not directly finance production in certain countries, France could be a de-facto beneficiary because a large share of its power supply is nuclear.

Macron also said the EU should not set rules that mean public aid ends up benefiting battery production in China or the US.

“We’ll support batteries and vehicles produced in Europe, because their carbon footprint is good,” Macron said. “That doesn’t mean we’re doing protectionism, we’re not closing the market, but we won’t use French taxpayer money to accelerate non-European industrialization.”

--With assistance from Giovanni Salzano.

(Updates with details from speech starting in eighth paragraph.)

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