Is the French economy heading straight into a “wall of debt”? With the establishment of loans guaranteed by the State from the start of the health crisis, the government insisted on being at the bedside of the economic world. And the first figures relating to the device testify to the massive recourse he has known. At 1is May, nearly 138 billion euros of EMPs were granted, to more than 670,000 companies.
But while the government has extended the possibility of subscribing to it until the end of the year, the question of reimbursement raises questions, even worries. In an information report dated May 12, entitled How to successfully exit from state guaranteed loans?, Senator LR from Meurthe-et-Moselle Jean-François Husson explains that “the effectiveness and the long-term consequences of this device on the productive fabric are questioning. While many companies fear that they will face a real “debt wall”.
A situation that prompted Pierre-Antoine Lévi, centrist senator from Tarn-et-Garonne, to write to the Minister of the Economy, Finance and Recovery Bruno Le Maire to ask for “the staggering of the reimbursement of the EMP”. Clearly, the letter, co-signed by 64 senators from all political stripes, calls on the government to spread the reimbursement of these EMPs over 10 years, against the 5 currently planned.
A massively used crisis system
“My report says it clearly, it is a device that works, and the responsiveness of the government has been very important. There is no subject on this, ”explains Jean-François Husson straight away. This is evidenced by the popularity of the device. During the year 2020, 40% of companies went to their bank to contract an EMP, or even 50% in the most affected sectors such as hotels and restaurants. For amounts around 5% of GDP, against 1% in Germany.
In his letter, Pierre-Antoine Lévy thus recognizes that “The” whatever it costs “dear to the President of the Republic and the support measures that have been proposed by the State are, it must be admitted, unique to the world. They have shown their effectiveness, to avoid an economic cataclysm ”. “The observation is shared by many senators from all departments. When I proposed the letter and the five-year extension measure, the majority of senators accepted, because it is a global problem, ”said Pierre-Antoine Lévy.
Even if the figures show that a still significant part of the French recovery has directly relied on companies, precisely through these loans guaranteed by the State. Jean-François Husson’s report explains that “French companies have kept at their expense a share of the cost of the crisis that is significantly higher than the European average, estimated at 22% against 7% for the European Union average and 0 % in Germany “.
A finding that has nevertheless not slowed down businesses in their banking frenzy, especially as the crisis begins to set in over time, and that a “normal” resumption of activity is not expected before. minus the end of the year. Bruno Le Maire, alongside the Minister of Labor Élisabeth Borne and Alain Griset, Minister in charge of Small and Medium Enterprises, thus announced at the end of April that the device would be extended until Christmas, against the date of June 30 initially retained.
The fear of the “wall of debt”
However, this massification of indebtedness is starting to cause concern. Pierre-Antoine Lévi, the author of the letter requesting an extension of the reimbursement over 10 years, explains that he “met with economic players, in particular representatives of the aeronautical world, very present in Tarn-et-Garonne. They have used the EMP extensively and are very worried. Five years of amortization is too short, especially in sectors such as the hotel industry where the restart is still pending ”.
Jean-François Husson believes that the massive indebtedness of the French economy is “likely to affect the ability of the French economy to rebound”. “There is a figure that must be looked at closely, it is the one stating that the French lost 1% of income in 2020 and businesses 22%. You don’t wipe out a 22% loss of income with the stroke of a pen. With such a lack of competitiveness, it is as if you were asked to run the 100 meters with a 4 kg bag on your back, ”continues the senator.
Its report also highlights several fears. Businesses “may be forced to cut capital spending to survive, leading to a so-called ‘debt strangulation’ situation which then harms the productivity of our economy.”
The fear of “zombie companies”
The other point that worries Jean-François Husson is what he defines as “zombie” companies. “Today, an estimated 7.5% of them are ‘zombies’. That is to say, non-viable companies, which should have gone bankrupt in 2020, but which thanks to aid and PGE have been kept in an artificial coma. In 2020, there were 40% fewer business failures, the commercial courts were emptied. We can therefore fear a cascade of bankruptcy filings next year, when the aid will stop, ”explains the senator.
Pierre-Antoine Lévy says he is aware of this problem, and that the lengthening of the reimbursement period that he is requesting will be able to keep non-viable businesses on a drip for a little longer. “When you pour assists, there are always holes in the racket. But there are more companies that will be able to benefit from this device, and for the most part, the repayment over 10 years will be beneficial to as many people as possible ”.
Even if he considers that the diversity of the situations of French companies suggests very different reimbursements. “The ability to repay in 10 years should not be automatic. Some will be able to repay in five years and will do so. My appeal concerns sectors hit hard, such as the hotel industry for example ”.
A bunch of necessary measures
A great diversity of situations which makes Jean-François Husson say that a battery of measurements is essential to emerge as well as possible from this period marked by the massive use of the EMP. “It is a bunch of solutions that is necessary. We thought at the outset that large companies would swallow up aid, while it is very small businesses and SMEs that have subscribed massively. We therefore do not need the same tools depending on the company. When we auditioned the world of caterers in Nancy, we realized that large companies were going to take a long time to restart, while smaller caterers were going to restart very quickly. This calls for different measures to help them repay the EMPs ”.
The senator, in his information report, therefore lists eight recommendations, such as capping participatory loans to limit the indebtedness of companies, or identify companies in economic difficulties to offer them additional support.
Pierre-Antoine Lévy, warns him about the devices that must imperatively accompany the extension of the reimbursement of five years that he proposes. “Interest rates must remain frozen, and most importantly, the state must stand by the companies and continue to provide loans.”
–
