Huge Cash Handouts to French Companies

French companies benefited from €65 billion in public aid in 2005, according to a recent report prepared for the French Prime Minister. The sum is equivalent to 4% of the gross national product. It is higher than the central government budget for education, and twice the amount spent on defence. It is also far in excess of the sum reported to the European Commission, which records only €10 billion of public aid. This wide-ranging review considered all types of public assistance, including direct subsidies, but also tax and social security breaks. Over 90% of the aid came directly from central government, but a not inconsiderable €6 billion originated from the local and regional councils and €335 million from the European Union. Apart from the scale of the public subsidy, the report highlights the wide-ranging nature of the schemes and their sheer complexity. The research team were left ‘speechless’ in finding over 6000 different forms of assistance, of which only 22 came from the European Union. Many of the schemes were geographically specific, with over 650 within the Paris region alone. The researchers considered that, with so many schemes in existence, it was impossible to make an objective evaluation of the benefits of the aid. Indeed, they considered that a large number were unlikely to be effective in stimulating enterprise and growth. Thus, there are over 100 schemes in existence aimed towards new business start-ups, but only 10% of new businesses actually benefit from this assistance. Nearly 80% of the aid went to larger companies (mostly in the form of job subsidies) at the expense of small to medium sized businesses. The French report follows hard on the heels of a report from the European Commission, which found that most member states were too generous in their support of companies.