France on Tuesday has unveiled what it described as a 15 billion euro ($16.9 billion) support package for its aerospace industry, saying huge numbers of jobs were at stake amid a slump in air travel demand due to the coronavirus crisis.

French Economy and Finance Minister Bruno Le Maire addressed a press conference on the government’s plan for the support of the hard-hit aviation industry in Paris on Tuesday.

He was accompanied by French Junior Minister for Economy and Finance Agnes Pannier-Runacher, Defence Minister Florence Parly, Minister for the Ecological and Inclusive Transition Elisabeth Borne and Junior Minister for Transports Jean-Baptiste Djebbari.

The plan includes an investment fund starting at 500 million euros with a target of 1 billion to boost the development of medium-sized suppliers, and 300 million euros of other aid to help aerospace sub-contractors modernise plants.

France will also invest 1.5 billion euros over three years to support research into new environmentally friendly aviation technology, of which 300 million will be available this year.

The plan reinforces some measures already available such as furlough schemes and export credit guarantees.

“In total, this plan will represent more than 15 billion euros of aid, investment, loans and guarantees,” the government said. The total includes 7 billion euros of aid already announced for Air France and an acceleration of existing orders for Airbus tankers and other military kit.

France’s economy will take two years to recover from its worst post-war recession, triggered this year by the coronavirus outbreak, the central bank (CB) said on Tuesday.

The eurozone’s second-biggest economy is on course to contract 10.3% this year, before it bounces back with growth of 6.9% in 2021 and 3.9% in 2022, the Bank of France forecast.

Nearly one million jobs are likely to be shed this year and unemployment could climb to a new record of 11.8% in the first half of 2021.

The central bank said the outlook could be brighter if the virus is quickly brought under control, while a second wave of infections could plunge the economy into a 16% downturn this year followed by growth of only 6% in 2021 and 4% in 2022.

The forecasts did not take into account the potential impact of a recovery plan that the government aims to announce in the coming months.

President Emmanuel Macron put France under one of the most stringent lockdowns in Europe in mid-March, effectively shutting down large swathes of the economy until restrictions began to be lifted on May 11.

As of the end of May, economic activity was still running 17% below normal levels, though up from the 32% reduction seen during the first two weeks of lockdown in March, the central bank estimated. Business surveys suggested activity could get back to less than 12% of normal levels this month, it added.

Nonetheless, the time spent under lockdown meant that the economy probably contracted 15% in the second quarter from the previous three months, when it had already slumped 5.3%, the Bank of France estimated.

French Finance Minister Bruno Le Maire criticised US threats of trade sanctions over digital service taxes, which he said clashed with its calls for G7 unity on other issues.

Washington launched probes on Tuesday into digital services taxes being adopted or considered by Britain, Italy, Brazil and other countries, following an earlier investigation into France, in a move that could lead to new punitive tariffs.

“There’s a real contradiction between the United States’ call for unity within the G7, which we support, and the possibility of new trade sanctions,” Le Maire told his G7 counterparts on a conference call.

Paris offered in January to suspend its digital tax on tech companies’ income in France until the end of the year while new rules for the cross-border taxation of big digital companies are being negotiated at the Organisation for Economic Cooperation and Development (OECD).

Though most countries want new international rules agreed by the end of the year, the coronavirus outbreak has slowed progress in the OECD talks. Meanwhile, France has said it will tax big digital companies this year whether there is progress or not.

“We will give no ground on digital tax. I call on all G7 states to step up work at the OECD to reach an international solution by the end of 2020,” Le Maire said.

A French finance ministry official said his remarks were subsequently echoed by his British, Italian and EU counterparts on the G7 call.

Reuters