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The Fed, Still Inflation-Focused, Raised Rates Amid Bank Uncertainty

Federal Reserve officials raised interest rates by a quarter-point while they noted that bank turmoil could help slow the economy.

NYT by Jeanna Smialek

Donald Trump Grand Jury Is Called Off for Wednesday

Panel’s activities are closely watched as hush-money investigation nears its end

TWSJ by Corinne Ramey and Jennifer Calfas

Big Oil Eyes New Deals in North Africa Amid Rising Energy Demand

Halliburton and Honeywell in advanced talks to develop oil fields and refineries in Libya; Eni importing more oil and gas from Algeria

“North Africa’s massive oil-and-gas reserves and its proximity to Europe make it an attractive alternative energy supplier to Russia.

By Chao Deng and Benoit Faucon, March 23, 2023

Xi’s delay of Siberia pipeline signals limits to his embrace of Putin

Putin is desperately scouting for hungry new gas markets after Russia lost the bulk of its most important export market, Europe, following his invasion of Ukraine. That loss included Putin’s ill-considered move to cut gas supplies to Germany through a significant pipeline last year.

TWP By Robyn Dixon, March 22, 2023

Corporate profits: Macron favors 'exceptional contribution' over tax

The government wants to require companies that employ more than 5,000 people and that are buying back shares to better share profits with employees.

Le Monde by Elsa Conesa and Audrey Tonnelier, published on March 23, 2023

The Fed, Still Inflation-Focused, Raised Rates Amid Bank Uncertainty

Federal Reserve officials raised interest rates by a quarter-point while they noted that bank turmoil could help slow the economy.

NYT by Jeanna Smialek

WASHINGTON — Federal Reserve officials raised interest rates by a quarter-point on Wednesday as they tried to balance two conflicting problems: the risk that inflation could remain rapid and the threat that turmoil in the banking system could slow the economy drastically.

The Fed on Wednesday pushed interest rates to a range of 4.75 percent to 5 percent, and officials forecast one more rate increase in 2023 — though they hinted even that was uncertain. In doing so, policymakers tried to signal that they remained focused on wrestling down price increases but were also paying attention to financial threats.

“In assessing the need for further hikes, we’ll be focused on incoming data and the evolving outlook, and in particular on our assessment of the actual and expected effects of credit tightening,” Jerome H. Powell, the Fed chair, suggested at his post-meeting news conference.

The Fed’s statement said that some additional rate moves “may be” warranted, and Mr. Powell emphasized that “may” was crucial: Officials do not know that yet.

His comments underlined that the outlook for whether rates would rise further — and, if so, by how much — had been made uncertain by turmoil in the banking industry that could make loans harder to come by, slowing the economy.

Officials forecast that next year they would lower rates more slowly than they had anticipated, so that rates linger at 4.3 percent by the end of 2024, up from 4.1 percent. That suggested that the fight for stable inflation could be a longer and more gradual one than many had expected even a few months ago, though the outlook is complicated by the bank turmoil.

The forecasts and Mr. Powell’s remarks together underlined that his central bank is confronting a complicated moment — and trying to buy itself the time to decide how to react.

The Fed has raised interest rates at the fastest pace since the 1980s over the past year to try to cool a hot economy. Yet inflation has been surprisingly stubborn, and the job market remains strong. Those facts would likely have called for a more aggressive Fed response.

But high-profile bank collapses in recent weeks have underscored the risk that rapid Fed rate moves could stoke financial instability. Silicon Valley Bank, which failed on March 10, did so partly because it had amassed big losses on its portfolio of securities as interest rates climbed. And even more critically, the bank problems threaten to weigh on lending and spending, which ramps up the risk of a recession.

“The bottom line is: Credit conditions are going to tighten, and the Fed is acknowledging that,” said Diane Swonk, the chief economist at KPMG. The Fed “would like a slow cooling,” she added. “They just don’t want a deep freeze. And this increases the chances that the economy falls through the ice.”

Stocks, which initially jumped after the Fed’s decision was announced, fell sharply on Wednesday, finishing the day down 1.65 percent as investors digested the Fed’s interest rate move and comments by Janet Yellen, the Treasury secretary, suggesting that the government was not looking into a plan to extend broad protection for uninsured deposits.

The continuing jitters about the banking system come at a time when the economy has otherwise appeared strong — in spite of the Fed’s policy adjustments.

The Fed has been rapidly raising its policy interest rate since March 2022, making it more expensive to borrow money in hopes of cooling spending and eventually weighing down inflation. Officials made four straight three-quarter-point rate increases last year before slowing to a half-point in December and a quarter-point in early February.

Just two weeks ago, many economists and investors thought central bankers might speed their rate moves back up at this meeting because incoming economic data had retained so much momentum. Policymakers had hinted that they might revise up their forecasts for how much interest rates would rise in 2023.

“As of a couple of weeks ago, it looked like we’d need to raise rates — over the course of the year — more than we’d expected,” Mr. Powell acknowledged on Wednesday.

But the Fed chair explained that the bank problems had changed the outlook. By making it harder for consumers to access credit to buy houses or cars, or make other big purchases, the issues could weigh on demand, allowing the Fed to adjust interest rates less drastically.

“Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation,” the Fed’s policy committee said in its post-meeting statement. “The extent of these effects is uncertain.”

Economists at Goldman Sachs estimate that the effect could be equivalent to the slowdown prompted by one or two Fed rate increases. Mr. Powell seemed to suggest during his news conference that his estimate — while far from clear — was in that ballpark.

“You can think of it as being the equivalent of a rate hike, or perhaps more than that,” he said. “Of course, it’s not possible to make that assessment today with any precision whatsoever.”

How the Fed’s projections for future interest rates have evolved

The evolution of the federal funds target rate from March 2018 to March 2023. As of March 2023, the target rate is 5 percent. The latest projections show, on average, an increase by the end of 2023 and decreases in subsequent years.

But even with a bank-induced hit to the economy, the process of restoring stable inflation could take time.

Policymakers expected rapid price increases to be a more lasting problem, based on their fresh economic estimates. Officials thought inflation would finish 2023 at 3.3 percent, up from 3.1 percent in their December projections. That inflation measure was 5.4 percent in January.

Central bankers aim for 2 percent inflation on average over time. While price increases have been slowing from very elevated levels last year — the Fed’s preferred inflation index peaked at about 7 percent last summer — that progress has not been as steady as many hoped.

Continued price increases are weighing on family budgets, and there is a risk that a long period of quick inflation could make price increases a more permanent feature of the American economy.

That is what central bankers are trying to avoid. By lifting rates quickly over the past year, they have hoped to cool growth and bring inflation under control promptly. While brisk monetary policy adjustments increase the risk of financial turmoil and other problems, central bankers have worried that inflation will be harder and more painful to stamp out if it becomes entrenched in daily household and business behavior.

Once people are used to asking for big pay raises to cover climbing costs, and companies are used to making regular price increases, it could take a bigger economic downturn to rewire those habits and change the course of price increases.

“We have to bring inflation down to 2 percent,” Mr. Powell said. “The costs of failing are much higher.”

Jerome H. Powell said that the Federal Reserve raised interest rates to combat inflation amid turmoil in the banking system.CreditCredit...T.J. Kirkpatrick for The New York Times

A critical question is whether the Fed will be able to slow the economy enough to cool inflation without a recession. Mr. Powell suggested that he still thought such a “soft landing” was possible — though he acknowledged that the recent banking upheaval has not helped.

“I think that pathway still exists,” Mr. Powell said. “We’re certainly trying to find it.”

Wall Street analysts have pointed out that the risks are greater in a world with financial turmoil, given that problems in the banking sector can easily spill over to hit Main Street.

“You have the trigger that can make it into a deeper recession — can make it into a hard landing,” said Priya Misra, the head of global rates strategy at TD Securities.

Donald Trump Grand Jury Is Called Off for Wednesday

Panel’s activities are closely watched as hush-money investigation nears its end

TWSJ by Corinne Ramey and Jennifer Calfas

The Manhattan grand jury investigating Donald Trump’s role in a hush-money payment to a porn star was instructed not to meet Wednesday, according to people familiar with the matter, delaying any potential indictment of the former president.

The district attorney’s office notified court officials Tuesday night about the change in plans, the people said. The grand jury is now scheduled to reconvene Thursday, according to the people. It wasn’t clear what prompted the change.

A spokeswoman for Manhattan District Attorney Alvin Bragg said the office couldn’t comment on grand-jury matters. 

The change in schedule was earlier reported by Insider.

The grand jury’s activities have been closely watched as the hush-money investigation into Mr. Trump, run by Mr. Bragg, nears its end. The jury could still hear from additional witnesses, or prosecutors could formally present charges, which is the final step before the panel votes on whether to indict.

Any potential indictment wouldn’t be public until it is unsealed by a judge. While the timing of any possible surrender by Mr. Trump is unknown, law-enforcement officials said they anticipated it likely wouldn’t happen this week.

Mr. Trump has said he didn’t do anything wrong and accused Mr. Bragg, a Democrat, of damaging his electoral prospects. On Tuesday he criticized Michael Cohen, a key potential prosecution witness who served as his personal lawyer at the time of the payment, on the eve of the 2016 presidential election. “In the history of our Country there cannot have been a more damaged or less credible witness at trial than fully disbarred lawyer and felon, Michael Cohen,” Mr. Trump wrote on his social-media network. Over the weekend, he called on his supporters to protest.

Meanwhile, police have erected barricades around and near a lower Manhattan courthouse as people in the city and across the U.S. await the grand jury’s vote. Very few demonstrators of any political persuasion had gathered by mid-day Wednesday. Television-news crews packed the sidewalks near the court building, while reporters and a handful of lookers-on awaited the potential arrival of witnesses. A tour guide chaperoning a group past the scene asked the scrum, “any Trump sightings yet?”

On a street corner across from the city’s Collect Pond Park, California painter John Paul Marcelo contemplated his canvas, adding a stroke of pale yellow to capture the late-morning light shining on the court buildings he was painting. “It’s the first time in American history that this is happening,” he said, referring to the potential indictment of a former president. “And if it does happen, I feel like that’s a super rare thing to paint.”

The New York Police Department said it was ready to respond to any protests or counter protests. A department representative said there would be an uptick in uniformed officers in each of the city’s five boroughs. New York City Mayor Eric Adams said Monday the city was monitoring comments on social media and police were “making sure that there’s no inappropriate actions in the city.”

The grand jury has been hearing testimony about the payment to porn star Stormy Daniels and its aftermath since late January. Robert Costello, a lawyer who briefly advised Mr. Cohen, appeared Monday at the request of Mr. Trump’s lawyers. He told reporters after his testimony that in 2018, Mr. Cohen said the payment to Ms. Daniels was intended to protect Mr. Trump’s wife.

Mr. Cohen has said publicly that Mr. Trump told him to pay Ms. Daniels to keep her from going public about an alleged affair with Mr. Trump, which he denies.

Prosecutors have considered charging Mr. Trump with falsifying business records because reimbursements to Mr. Cohen were falsely labeled as legal expenses.

All of the major players involved in the payment, including Mr. Cohen, have testified before the grand jury. While Ms. Daniels has met virtually with prosecutors, she hasn’t appeared before the panel.

At Trump Tower in Midtown Manhattan Wednesday morning, barricades were present at the Fifth Avenue building, as well as at stores across the street. Inside, Trump Tower’s lobby was open to the public with a couple of police officers by the entrance.

Law-enforcement officials met this week to make security plans and the Secret Service is working with local authorities on discussions.

In Washington, D.C., the Metropolitan Police Department was monitoring the situation, according to a spokesman. He said he wasn’t aware of any plans related to the possible indictment. A representative for Capitol Police said Tuesday the department “cannot discuss potential security plans.”

—James Fanelli  and Will Parker contributed to this article.

Big Oil Eyes New Deals in North Africa Amid Rising Energy Demand

Halliburton and Honeywell in advanced talks to develop oil fields and refineries in Libya; Eni importing more oil and gas from Algeria

“North Africa’s massive oil-and-gas reserves and its proximity to Europe make it an attractive alternative energy supplier to Russia.

By Chao Deng and Benoit Faucon, March 23, 2023

CAIRO—After years of underinvestment in North Africa’s energy infrastructure, global oil-and-gas giants from Halliburton Co. and Chevron Corp. to Eni SpA are ramping up their presence in the region as demand from Europe grows.

Executives in the industry are betting it is worth drilling again in some of the hardest places to do business in the world as Europe increasingly turns to other sources for its energy needs after shunning its main supplier, Russia, over the invasion of Ukraine. In recent months, a string of European officials have visited the region to help advance talks over potential supply deals.

Halliburton and Honeywell International Inc. are hammering out $1.4 billion worth of deals to develop an oil field and refinery with National Oil Corporation in Libya, which has the largest known oil reserves in Africa, according to the chairman of state-owned firm, Farhat Bengdara. Italy’s Eni is planning investments aimed at replacing nearly half of the gas it was importing from Russia with gas from Algeria.

Chevron is also looking to seal an energy exploration deal in Algeria, The Wall Street Journal reported last month. In January, the U.S. oil major announced a sizable natural-gas discovery in Egypt.

“North Africa has been slow to develop its potential because of political risks, either related to insecurity or bureaucracy,” said Geoff Porter, president of U.S.-based North Africa Risk Consulting Inc. But with Europe needing to replace Russian energy, “this is their moment,” he said.

Western oil executives say they see a more stable political climate in North Africa, especially in countries such as Libya where fighting between local militias has been subdued in the past two years following nearly a decade of civil war. Many American firms had pulled back from the region, viewing it as politically too risky, to focus on shale production at home. The region’s proximity to Europe and massive reserves, with Algeria holding the third-largest recoverable shale resources in the world, also make doing business there worth the risk, they say.

At the same time, state-owned firms in the North African region have been eager to strike deals, as they see an opportunity to fill a gap left by Russia and take advantage of higher global commodity prices. Some countries, such as Egypt, are eager to bring in additional revenue from selling energy, as their economies struggle with higher import costs including for food. The Ukraine war has disrupted shipments and pushed up global commodity prices.

“I think we can be a good replacement for Russian gas to Europe,” NOC’s Mr. Bengdara said.

Farhat Bengdara, chairman of National Oil Corporation in Libya, which he says has the largest known oil reserves in Africa.

The Libyan state-owned company is expected to soon sign a $1 billion agreement with Halliburton that will allow the U.S. firm to rebuild the al-Dhara oil field, according to Mr. Bengdara. The oil field in central Libya was destroyed by Islamic State militants in 2015 and is now run by ConocoPhillips and TotalEnergies SE, Mr. Bengdara said. It would be one of the biggest deals for the U.S. oil-services giant clinched in the Middle East and North Africa in recent years.

Halliburton and Total didn’t respond to requests for comment. ConocoPhillips declined to comment.

Libya’s NOC and Honeywell are set to unveil a contract related to the construction of a refinery in southern Libya, Mr. Bengdara and a spokesman for the American firm said. The initial deal, expected to be announced this weekend, is for the design of the plant, the spokesman said, which would be followed by a $400 million pact to build the entire plant.

Libya relies heavily on its oil resources for income, although it has struggled for years to turn its own crude into motor fuel, making it largely dependent on costly gasoline imports.

As of last year, the North African nation was divided politically again, with a United Nations-appointed prime minister, Abdul Hamid Dbeibeh, remaining in control of the capital Tripoli and a rival prime minister taking charge of the country’s east. The country is again pushing to hold presidential and legislative elections this year, after plans fell through in 2021.

State-owned firms in the North African region have been eager to strike deals with Europe.

Still, there have been no serious clashes since last summer and its eastern government in recent months has unlocked some of the budget needed by the state oil company to clinch deals with international companies.

Secretary of State Antony Blinken told a senate committee on Wednesday that the U.S. was actively working to reopen an embassy in Libya, in part so it could better support the prospect of Libyan elections. The U.S. shut its embassy in Tripoli in 2014 following violent clashes between militias.

The U.S. also pressured a top Libyan commander in mid-January to expel Russia’s paramiliatry Wagner Group, the Journal reported last month, amid fears the unit may tap into the country’s oil riches. Khalifa Haftar, commander of a faction that controls eastern Libya, is aligned with the government in Tripoli.

“There is recognition in the U.S. that Libya is a workable environment,” said Mr. Porter, who advises U.S. oil companies in the region. He added that firms now see it as “an environment in which you can operate reasonably safely, where you can more predictably invest in ways that you could not have a few years ago.”

NOC exports most of its gas to Europe through a pipeline from Libya to Italy. Over the next three to five years, it aims to increase oil production to 2 million barrels a day, from around 1.2 million currently, and to produce 4 billion standard cubic feet of gas a day, up from roughly 2.6 billion.

In January, NOC and Eni, which produces the majority of the country’s gas, signed an $8 billion deal for the Italian energy giant to develop two gas fields to pump 850 million cubic feet a day for 25 years. Under the agreement, production of gas will start in 2025, ramping up to full capacity of 850 million cubic feet a day by 2026.

In Algeria, Eni is aiming to export an additional 3 billion cubic meters of gas annually, starting this year, to help make up for gas that used to flow from Russia. Algeria will become the firm’s top region for investment in the next four years.

“Algeria is a reliable partner of absolute strategic importance,” said Italian Prime Minister Giorgia Meloni during a visit to Algiers in January.

From Egypt, Eni aims to export three billion cubic meters of liquefied natural gas to Italy starting this year, after regas capacity was built up on the receiving end. That compares with roughly 1 billion cubic meters being exported last year.

Egypt’s ability to export gas is limited given the growing electricity demand of its more than 100 million population. It doesn’t have any pipelines to Europe. Still, the country has ambitions to become a hub for energy distribution in the Mediterranean, importing more gas from Israel and exporting liquefied gas on ships to Italy.

Xi’s delay of Siberia pipeline signals limits to his embrace of Putin

Putin is desperately scouting for hungry new gas markets after Russia lost the bulk of its most important export market, Europe, following his invasion of Ukraine. That loss included Putin’s ill-considered move to cut gas supplies to Germany through a significant pipeline last year.

TWP By Robyn Dixon, March 22, 2023

Snow covers sections of pipework at Gazprom's Atamanskaya compressor station near Svobodny, Russia, on Dec. 11, 2019. (Andrey Rudakov/Bloomberg News)

RIGA, Latvia — Russian President Vladimir Putin this week called the Power of Siberia pipeline, which carries Russian gas to China, the “deal of the century.” But Putin’s hopes of swiftly securing a sequel of the century — the giant Power of Siberia 2 — deflated over two days of talks with Chinese leader Xi Jinping this week.

Putin is desperately scouting for hungry new gas markets after Russia lost the bulk of its most important export market, Europe, following his invasion of Ukraine. That loss included Putin’s ill-considered move to cut gas supplies to Germany through a major pipeline last year.

Russian gas giant Gazprom has been pushing the Siberia pipeline plan for years, and all eyes were on the meetings with Xi this week for signs of agreement. It never materialized.

Xi’s support for Putin, despite his invasion of Ukraine, is a geopolitical milestone — the Chinese leader called it a change “that hasn’t happened in 100 years” — as Beijing positions itself for an era of growing confrontation with the United States and presses for a multipolar world to end Washington’s global dominance.

But Xi’s failure to give Russia the additional symbolic boost of a giant gas pipeline deal showed that he would not sacrifice China’s economic self-interest, and it highlighted Putin’s weakness and growing dependence on his “dear friend.”

Even if there had been an agreement, the pipeline would take many years to build and would not help Russia’s short-term economic problems with its shrinking revenue due to sanctions.

Xi’s trip offered Putin important moral support, and Chinese trade has bolstered Russia’s economy, but the lack of a deal on Power of Siberia 2 showed the limits of what Xi is willing to do, said Janis Kluge, an expert on Russia’s economy with the German Institute for International and Security Affairs.

“Russia needs a lot from China right now, and it’s in a very weak position,” Kluge said.

“Basically, it would be a gesture of trust or loyalty from the Chinese side because, of course, these gas deals are always very long-term commitments,” he said, adding that it was questionable if Power of Siberia 2 pipeline would ever be built, which in turn raises doubts about whether Russia’s western Siberian gas would ever be exported.

China does not want Russia to lose the war in Ukraine or to see the collapse of Putin’s regime, Kluge continued. “But this doesn’t mean that the relationship is blossoming,” he said. “There is now a clear dependency where there used to be a more symmetrical relationship. We can see that China is not offering anything more than the symbolics of this visit, and we can see that China is also more careful in its dealings with Moscow.”

Putin said on Tuesday that “practically all the parameters” of the Power of Siberia 2 deal had been agreed, but his comments concealed a defeat of Russian efforts to get final agreement from China.

“Unfortunately, ‘almost all’ is not ‘all’ of the parameters,” wrote Moscow-based analytical firm BKS, adding that “the agreement has been discussed in one form or another since 2004 or earlier, but the price issue has been a stumbling block again and again.

“If this aspect is not resolved, serious negotiations are still ahead and success is not guaranteed,” BKS wrote.

The leaders’ joint statement referred vaguely to “strengthening the comprehensive partnership in the energy sector” but, tellingly, only agreed to “make efforts to advance work on studying and agreeing” on the landmark project.

At the conclusion of Xi’s state visit, Deputy Prime Minister Alexander Novak could only say that details of the deal were yet to be worked out and that he hoped an accord would be reached sometime this year.

Konstantin Simonov, director of the National Energy Security Fund, a think tank, said Xi and Putin had been expected to sign the deal during their meetings.

“It is obvious that Russia needs the contract,” Simonov told Business FM, a Russian radio station. “Gazprom needs the contract, because last year we had a drop in supplies to the European Union of over 80 billion cubic meters. This is quite a serious volume, and this year we may lose another 30 to 40 billion cubic meters.”

“The fact that the contract has not been signed so far means that China believes that today Russia needs this project more, and it tries to drag out this delay in order to, most likely, get the most favorable conditions for itself,” he said.

…”Xi and Putin showcase alliance but offer no path to peace in Ukraine

Kremlin spokesman Dmitry Peskov denied reports that the failure to get a deal was a defeat for Putin, calling these “low-quality fake stories.”

“The reality is totally different,” Peskov said. “The expansion [of cooperation] was discussed.”

But there are plenty of uncertainties, including the expected level of Chinese gas demand in the 2030s, the price of gas at that time, China’s ready access to many other global suppliers and its capacity to increase its own domestic gas production.

From 2019 to 2020, Russia supplied 3 percent of China’s natural gas, compared with 10 percent from Turkmenistan and 12 percent from Australian liquefied natural gas (LNG), according to the Energy Policy Research Foundation. However, the original Power of Siberia project, which went onstream in December 2019, has increased supplies since. The foundation noted that China has kept its natural gas supplies well diversified, unlike many European nations before Putin’s invasion.

After meeting Xi on Tuesday, Putin said Power of Siberia 2, which would carry gas to China through Mongolia, is a “good project” and extolled Russia’s “reliable, stable” supply. In fact, analysts say, Moscow has often used its gas supplies to exert damaging political pressure on its neighbors, including Ukraine, Georgia and recently Moldova.

In a blatant example, Russia indefinitely cut the supply to Germany via the Nord Stream 1 pipeline in September, citing maintenance issues, while the Kremlin denied manipulating supplies.

“I think that China was watching very closely what happened there, and they will try to stick to their strategy of diversification and not allowing a single supplier to have a significant chunk of the Chinese market,” Kluge said.

Weeks later, a pipeline attack by unknown saboteurs severed supplies via Russia’s Nord Stream 1 and the new Nord Stream 2 pipeline, which had yet to receive regulatory approval to begin operations.

…”As Xi visits Russia, Putin sees his anti-U.S. world order taking shape

Mongolian Prime Minister Luvsannamsrain Oyun-Erdene recently told Reuters that his country was waiting for China and Russia to agree on the details of the Power of Siberia 2 pipeline before going through the trouble of deciding on the route through his country. Gazprom needs agreement that China will purchase a certain volume of gas to make the project viable.

The biggest question mark is Chinese gas demand in the 2030s. The International Energy Agency’s World Energy Outlook last year reported that China’s LNG contracts, existing pipelines and new domestic gas projects would exceed its requirements up to 2035, as the growth in demand for gas slows.

“There are no easy options for Russia in its search for new markets for the gas it was exporting to Europe,” the agency reported. “Sanctions undercut the prospects for large new Russian LNG projects, and long distances to alternative markets make new pipeline links difficult.”

It predicted that Russia’s share of internationally traded gas would fall to less than 15 percent in 2030 from 30 percent in 2021, and that its net income from exports would plummet to less than $30 billion from $75 billion over that tim

Seaboard: pioneers in power generation in the country

…Armando Rodríguez, vice-president and executive director of the company, talks to us about their projects in the DR, where they have been operating for 32 years.

More than 32 years ago, back in January 1990, Seaboard began operations as the first independent power producer (IPP) in the Dominican Republic. They became pioneers in the electricity market by way of the commercial operations of Estrella del Norte, a 40MW floating power generation plant and the first of three built for Seaboard by Wärtsilä.

Corporate profits: Macron favors 'exceptional contribution' over tax

The government wants to require companies that employ more than 5,000 people and that are buying back shares to better share profits with employees.

Le Monde by Elsa Conesa and Audrey Tonnelier, published on March 23, 2023

Since the Covid-19 pandemic, share buybacks have reached record levels in France: Nearly €29 billion in 2021, over €27 billion in 2022, three times more than before the pandemic. Such figures are politically touchy, at a time when many are struggling with the cost of living.

On Wednesday, March 22, during a televised interview on TF1 and France 2, French President Emmanuel Macron singled out the "cynicism" of "these large companies that we helped" during the pandemic, adding he wanted to "work on an exceptional contribution so that when there are exceptional profits by companies that are ready to buy back their own shares, workers will be able to benefit from it."

But Macron ruled out the possibility of taxing these exceptionally high profits. The objective remains to encourage companies to better compensate their employees through existing profit-sharing mechanisms. He reaffirmed on Wednesday his desire to pursue a pro-business, supply-side policy, his economic common thread since 2017. This, he said, "implies assuming the tax choices we have made for companies: If we want to keep reindustrializing, we need more work and more capital."

Bruno Le Maire, the French finance minister, later said that this contribution would only apply to companies with a staff of more than 5,000. "We want to require them to engage in more profit-sharing, more participation, more tax-free bonuses when they buy back shares. We could consider, for example, a doubling of the amounts paid."

According to the French national statistics office INSEE, there were 273 companies with more than 5,000 employees in France in 2020, amounting to a total of 3.9 million employees.

'Feeling of injustice'

The government intends to let unions and employer organizations decide what this incentive should look like. It will come as a "third layer" in the process of improving the distribution of value, according to Le Maire, after a first set of measures introduced in 2017 with a simplification of profit-sharing and participation agreements, the elimination of the lump-sum tax on social security contributions and the tripling of a "Macron bonus" and a second set of measures, which included a levy on energy companies introduced in the fall of 2022 to finance aid given to consumers to compensate for rising energy prices.

"If it can go into effect in 2023, all the better," a source at the Finance Ministry said. The ministry, however, was not able to list the number of companies affected and the sums involved or say whether the measure would be included in a "labor law" or hypothetical legislation on value sharing. The 2024 budget could also be used to contain the measure.

This "exceptional contribution" was in the pipeline for several weeks. The unions and employer federations reached an agreement on profit sharing in February which Prime Minister Elisabeth Borne has since pledged to transcribe into legislation.

The settlement requires companies with 11 to 49 employees to set up a profit-sharing mechanism if they meet certain financial criteria. But within the majority, some elected representatives wanted to go further. They had worked on a system of "super participation" similar to Wednesday's announcement.

Presented by Macron as a response to the "feeling of injustice" regarding the pension reform, is this new contribution, which essentially targets employees of large listed companies, a response to the anger shown in the streets?

"Surely, this measure is not aimed at the worst-off employees," said Louis Margueritte, a member of Parliament with Macron's Renaissance party in charge of an information mission on the fiscal and social tools for sharing value. "But no one believes this measure will be enough to ease the tensions and anger in the country for a second. It's just a signal showing that we haven't exhausted the subject [of profits] with the energy companies."

During the 2022 presidential campaign, Macron had promised the introduction of an "employee dividend", before the idea, which looked politically attractive but vague from an economic point of view, was postponed. It emerged again during the budget debates in the fall as a response to purchasing power issues and to the grumbling of the opposition in the face of profits made by certain companies in a context of high inflation, in vain.

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