Coronavirus crisis in France: The battle to save the livelihoods of the self-employed

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Ingri Bergo - [email protected]
Coronavirus crisis in France: The battle to save the livelihoods of the self-employed

The French state has forked out billions for self-employed and small business owners whose livelihoods have been threatened by the coronavirus lockdown. But how effective is the rescue plan?


On the evening of March 16th Amanda Evans was one of more than 35 million people in France glued to the television to hear President Emmanuel Macron announce that at midday the next day the country would enter a strict nationwide lockdown aimed at containing the coronavirus epidemic.

“We are at war,” said Macron as he ordered people to stay home unless their work was essential and could not be done from home or postponed until after lockdown. 

The president told the nation there would have to be “sacrifices” and that the new restrictions would have “major economic consequences”.

It was the only way, the president said, to stem the spread of the epidemic and save the country’s hospitals from being overwhelmed by the rapidly rising number of critically ill Covid-19 patients.

In the space of a day millions of workers around the country saw their incomes threatened as the economy slowed to a near standstill.

As Amanda Evans listened to the president address the nation in a sombre but defiant speech, she knew that she and her partner Derek would be among the hardest hit by the nationwide “confinement”. 


Their tourism business French Riding Holidays, in the south of France, was just about to enter its busiest season.  

Based in the département of Aveyron, Amanda and Derek - both British - have 25 horses and 60 acres of land. For 15 years, French Riding Holidays has welcomed up to 200 guests a year from all over Europe, keen to explore the French countryside on horseback and share meals and a few glasses of wine in the evening.

“It’s a dream really, an amazing place” Amanda told The Local.

But for people across Europe the coronavirus pandemic transformed “normal” things like going on holiday into far-fetched fantasies.

For small businesses, the consequences of the lockdowns in France and all over Europe were especially dire. Over-represented in sectors such as the hospitality and hotel industries, they largely depend on people being allowed to leave their homes and travel. Remote working is usually complicated, if not impossible.

For eight weeks, thousands of shops all over France had to keep closed in the strict, nationwide lockdown: Photo: AFP

'Bounce back up after the crisis'

Small businesses are crucial to France’s economy. What are known as micro-entreprises - self-employed working on their own or with up to 10 employees - represent about 96 percent (3.9 million) of France’s total number of businesses and account for around 9 percent of the country’s GDP, according to the national research institute Insee.

For France, an economy that in recent months had just shown tentative signs of meaningful growth, the stakes were high.

"We won't add the fear of bankruptcy and unemployment to the health crisis," President Macron vowed before the lockdown. 

Macron and his centre-right economy minister Bruno Le Maire knew they had to keep companies on life-support whilst the health crisis was brought under control.

Masses of bankruptcies would have a devastating impact on individuals but also weaken the chances of the country making quick economic recovery.

“Rebondir après la crise” - ‘bounce back up after the crisis’ - became a sort of government motto.

Drawing upon lessons from previous economic crises, notably 2008 which had taken France years to recover from, Macron’s government launched a string of emergency schemes to help businesses cope with the massive financial losses.


€7 billion 'solidarity fund'

The government told businesses to sign their employees up for a furloughing scheme known as chômage partiel (partial unemployment), which had the state foot 84 percent of the wages for their employees. By the end of the lockdown, over 12 million people were enrolled in the programme.

Chômage partiel: What you need to know about France's crisis unemployment scheme

Small businesses were able to suspend payments on rent, gas and electricity until after the health crisis. They would also be able to tap into a ‘solidarity fund’ of €7 billion set up to extend grants to the ones among them that suffered the most.

The solidarity fund was twofold. One centralised scheme offered up to €1,500 in monthly emergency grants to all self-employed and small businesses with fewer than 10 employees, and with annual earnings of less than €1 million a year.

A second scheme consisting of larger emergency packages of between €2,000 and €5,000 was set up for regional authorities to give to the hardest hit small businesses in their area. This fund would be harder to access, notably because a main requirement was that the applicant had been declined a loan from their bank.

READ MORE: All you need to know about financial help in France for self-employed and business

"We won't add fear of bankruptcy and unemployment to the health crisis," said President Emmanuel Macron in one of his speeches before the government introduced the lockdown. Photo: AFP

In order to qualify for the first, centralised scheme, businesses needed to respond to a list of set criteria. 

Amanda Evans was one of thousands of businesses owners who, unlike bars and restaurants, had not been expressly ordered to close in the government decree from March.

To qualify for the hand-out she therefore had to prove that their income in March 2020 had dropped by more than 50 percent compared to their income in March 2019. 

As French Riding Holidays’ takings had plunged by 75 percent, Amanda logged into her personal account on the government website, uploaded all the necessary documents, and hit “send”. 

Two days later, the money was transferred into their account.

“I was very impressed,” Amanda said.

'It’s not a gold mine, but at least I have something to live off'

By the end of April, more than one million businesses had applied for grants for March. Of these, 703,355 received payments, the economy ministry told The Local in a statement.

“It has clearly been a big success,” Economy Minister Bruno Le Maire told French news channel BFMTV.

Initially the solidarity fund was designed to help around 600,000 small businesses get through the month of March. But as the epidemic continued to spread, the government extended the lockdown until May 11th and declared the rescue package fund would also apply to April and May.

So far, some €3.26 billion has been spent on 2,413,274 monthly grants for March and April, according to figures given to The Local by the economy ministry. Businesses were able to apply for grants for both months, and in June they will also be able to apply for a grant to cover May. Small businesses in the tourism sector will be able to apply every month until the end of 2020.

Of the total grants handed out so far, businesses in the greater Paris Île-de-France region benefited the most (€668.65 million), followed by those in Auvergne-Rhône-Alpes region (€425.73 million) and then two southern regions Alpes-Maritimes (€354.75 million) and Occitanie (€345.76 million).

MAP: Where France is spending its €7bn fund to help self-employed

The government has so far not released numbers regarding how many applications it has turned down. 

The French government has acknowledged that €1,500  -  an amount slightly larger than France’s monthly minimum wage (€1,219) - would not cover the losses for many of the businesses, but said at least they put food on the table.

“I get a lot of messages from people saying, ‘I received the €1,500, it’s not a gold mine, but at least I have something to live off’,” said Economy Minister Bruno Le Maire to French media.

Tourism spots will be among the hardest hit in Fance by the coronavirus crisis and the sector will be able to apply for solidarity fund grants all through 2020. Photo: AFP

'It's doing the job'

Raul Sampognaro, an economist at the research institute OFCE who specialises in public spending in France, said the goal of the solidarity fund was to help businesses over the first hurdle of the crisis.

“The government’s philosophy has since the beginning been to avoid mass layoffs and chain bankruptcies,” he told The Local.

“If you look at the package of measures put in place by the government - postponing expenses, bank guaranties and the solidarity fund - I would say that, for now, it’s doing the job,” he said.


But not all small business owners hard hit by the crisis were able to access the fund.

A British couple in a village on the French west coast, just south of Nantes, found themselves in an odd situation where, although both were registered as self-employed, only the husband qualified for the fund.

Catherine Cadogan is a self-employed event planner. Both business conferences she was working on in March were cancelled due to the pandemic, but, as she would be paid only after the conferences, her losses were not made visible in time for her to qualify for the solidarity fund for that month.

“It’s work that’s gone, I’m not going to get it back,” she said.

Her husband, Geoff, a freelance English teacher whose revenues were hit in March, did qualify for the grant although he had to wait several weeks before the money came through.

Other applicants like Catherine saw their demands declined because they fell outside the strict set of criteria. 

Brian McHale, a self-employed builder from Ireland whose main line of work is installing swimming pools, saw revenue drop from €12,000 to €2,500 in March, but still did not get support from the solidarity fund. 

His accountant explained that, because Brian had received payments up front for a couple of future projects just before the lockdown, his VAT declaration for March was higher than usual - even though the money did not count as revenue for work done in March.

“It would be very easy for the government to look at our VAT declaration which is actually higher than last year and sense a fraud even though our revenue is actually zero,” says Brian. 

His company, based in the western département of Vendée, was allowed to remain open throughout the lockdown, but as business ground to a halt he was facing a difficult future. 

“Four or five months like this would mean us closing down the business,” he said.

Bars and restaurants in France remain closed until at least June 2nd, probably longer in the hardest hit areas of the countries. Photo: AFP

'Doesn't sound like a lot'

Apart from the delays in processing the grants the strict criteria that saw some struggling companies miss out, there was another element to the fund that could prove problematic in a long-term perspective: its size.

€7 billion is a lot of money. While it might be enough to get businesses over the first hurdle was it sufficient to help them “bounce back after the crisis,” like the government wanted? 

Dermot McCarthy, an economics lecturer at Bournemouth University in the UK questioned whether France was doing enough to save businesses in the longer term.

“The French government is doing a reasonable job to protect people’s earnings and going from month to month, but I would question what they're doing to ensure that the business can actually reopen?” he told The Local

“€1,500 per month doesn’t sound like a lot... The question is, will these supports continue, for how long, and how will they be phased out,” he said.

France's strategy to keep small businesses alive throughout the lockdown is not unique, and governments across Europe have introduced similar help packages.

German Chancellor Angela Merkel’s government put €50 billion on the table to fund grants for self-employed and small business owners who lost access to bank credit.

The individual grants were larger than France’s, with a one-off payment of €9,000 over three months for companies with up to five employees, €15,000 for those with up to 10.

Across the Channel, the UK’s Conservative government took a similar approach to France’s, giving money to local authorities for them to distribute in grants to local businesses in need. Spanning from £10,000 (€11,320) to £25,000 (€28,300), the grants were significantly larger in size than the French.

“One of the advantages of the UK grants is that it could be enough to keep the businesses running after the crisis,” McCarty said.

"Sorry, we're closed." Photo: AFP

'Banks are nervous about giving out loans'

While the French government stumped up cash to keep small businesses on life support it has been counting on banks to help bring them back to life after the health crisis subsides. 

At the outset of the crisis, Macron’s team gave €300 billion to banks to incentivise them to accept applications from small businesses in dire straits, guaranteeing 90 percent of the loans if the businesses were unable to pay them back.

Amanda and Derek Evans from French Riding Holidays applied for a loan, but were turned down because their incomes were registered in a British bank and not a French.

“We won’t have any money. We won’t be able to get food,” said Amanda Evans contemplating the "devastating" impact on their business.

She refused to give up and spent a weekend collecting documents from everyone who had visited their riding resort over the past three years as proof to the bank that their business was viable and able to stand on its own feet under normal circumstances. 

READ ALSO How to enjoy the holiday rules within the rules of France's lockdown phase 1

Relying on the banks was a main weakness of the French government’s plan to rescue France’s small businesses, said Tristan-Pierre Maury, an economics professor and researcher at the French EDHEC Online Economics Research Centre.

“The banks are nervous about giving out questionable loans and panicking their shareholders, even with the 90 percent state-guarantee,” he told The Local.

Of the total €300 billion given by the state, only €40 billion had been taken up in loans by mid May. Too little, according to Maury.

“I would have expected much more than that. Small businesses are experiencing a historically unprecedented economic downturn,” he said. 

The fear of scaring off banks

Once the solidarity fund was drained, Maury said, the government had two options; either put their foot down and say no, or put more money on the table.

The problem with the first option was that it could be politically problematic for President Macron, who after seeing a brief increase in popularity at the beginning of the crisis, had begun to face mounting criticism and a mini rebellion within his own party.

There was a high risk that the story of how Macron tried to save the country’s small businesses turned into the tale of how he sent them to the gallows. 

The problem with the second option of forking out more and more money meant taking on an even larger budget deficit and potentially causing problems with France’s creditors.

Like all countries in the process of thrashing out coronavirus crisis stimulus plans, France needed to remain credible on the market so that lenders would trust the country as able to repay its debts in the future. If lenders got anxious, they could increase interest rates (currently at zero) and make it very expensive for France to pay them back.

“The more indebted a country is, the lower fiscal margin they have, meaning they are less capable to react to the crisis,” said Anne-Laure Delatte, an economist who works at the French research institutes CNRS and CEPII.

By May 2020, France’s national debt had reached a level of about 97 percent of its GDP, according to Statista. In comparison, Germany’s debt is down at around 51 percent.

In mid-May, Fitch, one of the world’s three largest credit rating agencies, revised France’s rating from “AA stable” to “AA negative.” 

Delatte said this wasn’t particularly worrisome for France.

“Italy was also downgraded by Fitch, and the fear was that it could cause a self-fulfilling prophecy where everyone begins to rid themselves of Italian bonds” she said, adding that the European Central Bank (ECB) had prepared for such a scenario by changing their policy to “avoid this kind of scenario this time around.”

Germany, due to its reputation as a frugal spender and credible borrower, could logically more easily increase than France public spending without scaring off lenders. 

Macron and Merkel during a joint press conference this week. The two state leaders wand the EU to accept a €500 billion rescue plan to revive the union's economy. Photo: AFP

'Revealed holes in our system'

To help small businesses face the second phase of the crisis, French economist Raul Sampognaro said the government needed to develop specifically targeted measures, corresponding to what would be big variations in losses across different sectors.

“The crisis revealed fundamental holes in our social security system when it came to protecting self-employed in times of crisis,” he said. “That’s why they had to create the solidarity fund in the first place.”

In the end, Amanda Evans and her partner Derek got their loan, cushioning the blow of their mounting expenses and, at least temporarily, saving them from having to sell horses or shutting down for good.

“I would say our outlook is manageable rather than positive,” Amanda told The Local. Having minimised all their bills, they would be able to manage for at least the next six months. After that, everything depended on whether the tourism industry could be revived.

“We are in the same boat as everyone else,” Amanda said.

'We will win'

On the eve before the lockdown, president Macron said the sacrifices people would have to make “should never throw into doubt the sustainability of a business… or the self-employed.”

Much has changed since then, and, in the weeks following the president’s speech, Le Maire has said he is acutely aware of the solidarity fund’s limitations.

“We know that after this shock there is a risk that the number of bankruptcies will multiply, particularly for small businesses,” the economy minister said in a speech early May, when the country had been on lockdown for nearly seven weeks.

READ ALSO: How likely is a second wave of coronavirus in France?

Macron was more confident on the night of March 16th.

“We will win,” he said, but the president also acknowledged that nothing would be the same again.

France is facing its biggest recession in modern peacetime, and economists have said it will take years, probably decades, before the country gets back on its feet.

All depends on whether the country successfully manages to ease the lockdown without provoking a surge in infections that would force a second round of lockdown.

“If things go back to normal and we aren’t hit by a second wave of the virus, I think we can escape the worst-case scenario,” the economist Maury said. “But right now, nothing is certain.”

Confronting Coronavirus: This article is part of a new series of articles in which The Local's journalists across Europe are taking an in-depth look at the responses to different parts of the crisis in different countries; what's worked, what hasn't, and why.
This article has been supported by the Solutions Journalism Network, a nonprofit organisation dedicated to rigorous and compelling reporting about responses to social problems.
The SJN has given The Local a grant to explore how different countries are confronting the various affects of the coronavirus crisis and the successes and failures of each approach.
How well is France's €7 billion plan to save small businesses really working? by Ingri Bergo is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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