Renault not yet on board 5 billion euro bailout ship. Here's why

France's Finance Minister has told newspaper Le Figaro that the government was seeking commitments from carmakers in three areas in return for the loan: electric vehicles; the fair treatment of sub-contractors; and that they base hi-tech activities in France.
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| Updated on: 22 May 2020, 10:45 AM
File photo: The French government forecasts the euro zone's second-biggest economy will shrink at least 8% this year. (Bloomberg)
File photo: The French government forecasts the euro zone's second-biggest economy will shrink at least 8% this year. (Bloomberg)
File photo: The French government forecasts the euro zone's second-biggest economy will shrink at least 8% this year. (Bloomberg)
File photo: The French government forecasts the euro zone's second-biggest economy will shrink at least 8% this year.

France's Finance Minister Bruno Le Maire said he has not signed off on a 5 billion euro ($5.47 billion) state-guaranteed loan to help Renault cope with the fallout from the coronavirus, and that discussions continued.

Le Maire told newspaper Le Figaro that the government was seeking commitments from carmakers in three areas in return for help: electric vehicles; the fair treatment of sub-contractors; and that they base hi-tech activities in France.

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"Renault is fighting for its survival," Le Maire said in the interview published late on Thursday. "I haven't yet signed the loan."

Sources told Reuters on Monday that Renault had reached an agreement on the loan with banks and that it should be submitted to the board of directors soon, before being formally approved by the finance ministry.

Le Maire said France's response to the worst depression since World War Two totalled 450 billion euros in aid and state guarantees - 20% of France's annual national output.

The government forecasts the euro zone's second-biggest economy will shrink at least 8% this year. Its budget deficit is set to hit a post-war record of 9% of economic output this year.

(Also read: France wants Renault to maintain its plants in the country)

The European Union has granted member countries all the fiscal leeway they need to deal with the economic impact of the coronavirus, enabling governments to open the spending taps and wave aside EU budget rules that limit government borrowing.

There is no time limit set in the flexibility clause allowing this. Nonetheless, Le Maire said he hoped the rules would remain suspended in 2021.

(Also read: Renault to lay off 400 employees at this unit)

"Nothing would be worse than reviving the economic machine while applying the brake on public spending," he said.

First Published Date: 22 May 2020, 10:45 AM IST
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