"Inflation adjustment": More than half of the French receive 100 euros

The French government is reacting to the significant increase in energy prices and wants to help the population with one-off payments.

Prime Minister Jean Castex announced this on television on Thursday evening.

Accordingly, there should be an "inflation adjustment" of 100 euros for all those French who earn less than 2000 euros net per month.

The aid should be paid out in December and in January at the latest.

The French concerned would have to “do nothing” for this, because the money would be transferred “automatically”, according to Castex.

Niklas Záboji

Business correspondent in Paris

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His announcement was eagerly awaited.

The high energy prices have been a dominant topic in the French media for days.

As in Germany, the average price for a liter of petrol and diesel jumped the 1.50 euro mark.

In some places it even tends towards 2 euros.

It was already clear in the first half of October that the French government did not want to stand idly by this price increase.

Until recently, the only question that remained open was how exactly one wanted to help motorists.

Measures against the rise in electricity and gas costs were already decided at the end of September.

Accordingly, the regulated tariffs are to be capped.

The heating costs should no longer rise this winter, and electricity costs should only rise by 4 percent instead of otherwise by 12 percent thanks to a tax cut.

Regulated tariffs for gas are being phased out in France.

But just under a third of households have a gas connection, and many market tariffs are indexed to it.

A majority of the French have regulated tariffs for electricity.

The target group is the middle class

But it shouldn't stop there either. As Prime Minister Castex said on Thursday, the cap on gas tariffs, which originally only lasted until spring, will now apply for the entire coming year. The experts said that "the decline will probably take place more slowly than expected," said Castex in support of the reason.

In turn, 38 million and thus more than half of all French are expected to benefit from the “inflation adjustment”. The addressee is the “classe moyenne”, ie the middle class, said Prime Minister Castex. It is important to maintain their purchasing power. The upswing should not be stalled. Admittedly, the measures are also aimed at avoiding popular displeasure in the run-up to the presidential election next spring. The “yellow vests” movement ignited almost three years ago, in November 2018, because of the high fuel costs.

Employees should receive the 100 euros through their employer through the payroll, explained Castex, self-employed through the Urssaf organization.

In the case of the unemployed and recipients of social benefits, the authority Pôle Emploi should be responsible, in the case of pensioners the pension fund, whereby the threshold of 1943 euros per person per month applies.

The "inflation adjustment" should cost the French state 3.8 billion euros.

This is affordable without jeopardizing budget targets, the government assured on Thursday.

With the “inflation adjustment”, the government has agreed on a measure that is easier and quicker to implement than other discussed solutions such as a “fuel check” for needy drivers or a reduction in energy or VAT on petrol and diesel.

In particular, Finance and Economics Minister Bruno Le Maire had vehemently argued against a tax cut.

It is "not the right option, especially because it is very expensive," he said at the beginning of the week - even if taxes accounted for 60 percent of the retail price for a liter of diesel, so the displeasure about it is understandable.

According to Le Maire, 5 cents less taxes per liter of fuel would cost the state around 2.5 billion euros a year.

Demands are also being made in Germany

Regardless of this, such a measure is also unfair, as it benefits the SUV driver and the nurse with Renault Clio alike.

And "ecologically unwise" would be a tax cut on gasoline and diesel on top of that, said Le Maire.

That amounts to a “subsidy for fossil fuels”, which should be avoided.

But parts of the French government were also skeptical about the distribution of “fuel checks” to motorists. Because first of all, it would have to be determined who actually drives a car. Then it would have to be clarified whether all or only those who really depend on the vehicle receive state support. The business newspaper Les Echos asks whether the capital region of Île-de-France, which is easily accessible by public transport, should be treated differently than the rest of the country.

It is true that there is already an “energy check” for particularly low-income households in France to compensate for the high electricity and heating costs.

It is based on the taxable income, the composition of the household and its energy consumption.

However, with regard to the use of the car, the state has only limited access to such information.

In Germany, no specific help for consumers and companies is planned yet.

In response to the high prices for petrol and diesel, the Federal Association of Medium-Sized Enterprises demanded quick relief this week and brought a temporary reduction in the mineral oil tax into play.

The commuter allowance could also be “noticeably increased”, according to the association.