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New banking measures on their way, says Sarkozy

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Latest update : 2008-09-30

The French government is expected to unveil new measures this week to shore up the French banking system following a meeting between French President Nicolas Sarkozy and the country's chief bankers and insurers.


President Nicolas Sarkozy on Monday battled to contain fallout from the global financial crisis, moving ahead with plans for a world summit and calling a meeting of French banking and insurance chiefs.
  
France will host a meeting of European officials to prepare a summit "in the coming weeks to establish the basis of a new international financial system," said Sarkozy, whose country holds the presidency of the European Union.
  
Officials from Britain, France, Germany and Italy -- the EU members of the G8 -- will meet in Paris in the coming days to lay the groundwork, he said on the sidelines of an EU-India summit in the southern city of Marseille.
  
On Tuesday, the president is to meet at the Elysee presidential palace with banking and insurance company chiefs to take a close look at the health of French banks and review the credit level of French households and businesses.
  
The announcements came just as the Franco-Belgian bank Dexia said it would hold an emergency board meeting after liquidity concerns saw its shares fall by 27 percent.
  
On Sunday, the Benelux countries stepped in to partially nationalise the banking and insurance giant Fortis, increasing fears the crisis that has wiped out several US and British banks was spreading across Europe.
  
Sarkozy warned in a major address last week that France would not be spared from the turmoil unleashed by the US banking crisis.
  
A sign of trouble on the economic front came with the scheduled release later Monday of jobless figures that were to show 40,000 people joined the ranks of France's unemployed in August, the biggest spike since 1993.
  
After confirming it was expecting bad news on unemployment, the government called a crisis meeting for later Monday to discuss the shock figures, which have compounded worries about the financial storm.
  
Critics accused the government of deceit, saying that for months it had touted progress in economic reforms when the jobless situation was already less than rosy one month before the financial storm struck.
  
French ministers also sounded a confident note in the days following the September 15 collapse of US investment giant Lehman brothers that touched off the financial meltdown, saying French banks were solid.
  
Last week Sarkozy insisted the government would "guarantee the security" of the French banking system and warned he would "not accept that a single customer loses a single euro" to collapsing banks.
  
The right-wing president won election in May 2007 on a promise to rev up the economy and bring unemployment -- long the nation's number one concern -- down to five percent.
  
Former Socialist prime minister Lionel Jospin alleged that Sarkozy and his government were "trying to shift responsibility for the failure of their economic policy on the financial crisis."
  
The government unveiled a draft budget on Friday that scrapped a pledge to stamp out the deficit by 2012 and as Paris struggled to rein in public spending amid sluggish growth.
  
"We are in a quasi-recession," said presidential adviser Henri Guaino.
  
France is headed into a "difficult period" and the government will "do everything that is necessary" to prevent the economy from taking a nosedive, Guaino said.
  
Economy Minister Christine Lagarde said she nevertheless expected 2009 to end with a jobless rate of 7.1 percent, down from 7.2 percent in the second quarter of 2008.
  
That figure was the lowest rate in 25 years, capping a steady decline in the unemployment rate that had even allowed the problem to slide off the national radar over the past year.
  
Opinion polls show purchasing power has replaced unemployment as the number one concern of the average French voter.
  
Lagarde was to unveil a plan later to help French households from falling into a credit trap after the Bank of France said 88,000 people had filed for personal bankruptcy over the past four years, an increase of 70 percent.

Date created : 2008-09-30

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