France Expects Imminent EU Backing for Corporate Recovery Plan

France is optimistic that the European Commission will sign off within days on an innovative plan for helping companies through the post-pandemic recovery, according to a finance ministry official, who asked not to be identified.

The French government has proposed a program to partially guarantee billions of euros of so-called participatory loans to improve corporate balance sheets and encourage borrowing for investment. The scheme is intended to benefit companies with long-term prospects.

The instrument, which is supported by the French central bank, is essentially a blend of debt and equity -- and a crucial plank of the recovery strategy. The government is concerned that high debt levels built up during the pandemic not only put firms at risk of default, but also constrain their ability to borrow and invest.

The participatory loans could prove to be a model for other countries if the European Commission, which oversees rules on state aid, signs off on them. Spain is considering a similar tool.

France is also considering transforming some state-guaranteed loans into grants to help the hardest-hit companies. The nation has issued about 130 billion euros ($158 billion) of state-guaranteed loans, mainly to help small companies through the pandemic lockdowns. With the crisis continuing, some have sounded the alarm over their ability to repay the money.

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