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French Finance Minister Calls on Banks to Keep Loan Rates Low

French Finance Minister Calls on Banks To Keep Loan Rates Low

The French finance minister is counting on banks to help the state salvage the economy by supporting companies hit by fallout from the coronavirus pandemic.

Following months of strict lockdown to contain Covid-19, a wave of bankruptcies is looming. For companies that received state-sponsored loans, the fear is that the relief will prove short-lived, and interest rates could climb next year, increasing the cost of repaying the aid.

French Finance Minister Calls on Banks to Keep Loan Rates Low

“Hundreds of thousands companies have taken out state-guaranteed loans in March and April -- and it saved them,” Bruno Le Maire said Saturday on France Inter radio. “With a great deal of solemnity, I’m asking banks to continue supporting companies.”

Le Maire said interest rates on loans that get extended will be capped at 3%.

A national lockdown that began in March stifled the virus but also sent the economy into its worst tailspin on record. The government now expects that output may contract less than the 11% initially forecast this year, but with infections climbing in France and around Europe, uncertainty remains high.

Many small and medium-sized companies are concerned they won’t be able to repay their emergency loans with the virus spreading and the economic outlook grim.

Earlier this week, the government began dropping hints about the contents of its 100 billion-euro ($119 billion) plan to boost the economy. The plan will be announced on Sept. 3 and will focus on the supply side of the economy, including tax cuts for companies and increased investment.

On Friday, Le Maire insisted all actors in the economy must show “solidarity” in the next few months. He suggested the companies that benefit from state aid as part of the recovery plan should make commitments to maintain jobs in France and be accountable for their environmental impact.

©2020 Bloomberg L.P.