European stocks opened higher Tuesday after the French government announced details of a plan to pump 10.5 billion euros into the country's six largest banks in exchange for guarantees on lending to households and firms.
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PARIS - European shares rose in early trade on Tuesday, a day after the French government detailed plans to inject 10.5 billion euros into the country's six biggest banks to boost their capital.
The FTSEurofirst 300 index of top European shares was up about 0.8 percent, with banks among the top gainers. France's BNP Paribas jumped 6.5 percent, while Societe Generale soared 11.54 percent and Credit Agricole rose 7.8 percent.
French stocks surged 2.73 percent in initial trading to 3,542.69 points on the CAC 40 index, following a firm trend on other global markets. The CAC index had closed with a gain of 3.56 percent on Monday.
The DJ Euro Stoxx 50 index, rose 0.7 percent in early trading, while the DAX in Frankfurt rose 0.2 percent. The FTSE 100 index in London fell 0.3 percent.
The French government, following moves by other European governments, announced Monday details of a financial rescue package in which the country’s biggest bank, Credit Agricole, will get three billion euros, BNP Paribas 2.55 billion, Societe Generale 1.7 billion, Credit Mutuel 1.2 billion, Caisse d'Epargne 1.1 billion and Banque Populaire 950 million.
The plan will ensure banks are "able to finance the economy correctly," French Finance Minister Christine Lagarde told reporters after meeting with the heads of the banks. She added that the banks simply needed to increase their equity capital in order to give more loans to companies and individuals.
French lawmakers last week approved a 360-billion-euro package to rescue banks hit by the financial crisis. Under the plan, the French state was to provide 40 billion euros to recapitalise fragile banks -- the source of the payouts agreed on Monday night. Last week's plan also provided for up to 320 billion euros in inter-bank loan guarantees to overcome the credit crisis.
President Nicolas Sarkozy has pledged that no French bank will be allowed to collapse and that savers will not lose "a single euro" in the global turmoil unleashed by the collapse of US investment giant Lehman Brothers last month.
European governments move to shore up banking sector
Governments have pumped billions of dollars into troubled banks in recent weeks while central banks have injected huge amounts of cash into money markets in an effort to ease a credit crunch.
Sweden on Monday outlined a plan worth more than 1.5 trillion kronor (152.2 billion euros) that would include credit guarantees and a bail-out fund, while The Netherlands on Sunday announced a 13.4 billion dollar bailout for ING, one of the world's largest banks, after it had forecast a loss of 500 million euros, or 675 million dollars at current rates, in the third quarter. Although European banking shares were mixed on Monday, shares of ING soared 29 percent to close at €9.48. The DJ Euro Stoxx banks index, in comparison, fell 0.8 percent on Monday.
In other recent moves by leading European economies, Germany presented a rescue package that would provide 400 billion euros in bank guarantees and a further 100 billion euros in state funds to recapitalise its banks. And Britain offered up 37 billion pounds of taxpayers' cash to recapitalise three major banks -- Royal Bank of Scotland, HBOS and Lloyds TSB -- in a move that could make the government their main shareholder.
European Union finance ministers, meanwhile, have agreed to guarantee bank deposits of up to 50,000 euros ($67,930), compared with 20,000 euros under current rules.
French poll shows scepticism remains
Meanwhile, an opinion poll published Monday and reported by Agence France-Presse indicated widespread scepticism among the French that the rescue package would work.
Fifty-six percent of respondents to the poll, commissioned by the international programme Business Volunteers for the Arts (BVA), business daily Les Echos and France Inter radio station, said the measures introduced by the government will "not really" or "not at all" restore lasting confidence among investors.
A further 59 percent of people said the measures will "not really" or "not at all" ensure a return to economic growth.
Meanwhile, 79 percent of French people said that if the government "can loan 40 billion dollars to banks, it can afford to pay more to the poorest within society."
The poll was made up of a sample of responses given by 1,014 people, selected by a quota system, who were questioned over the phone between October 17 and 18.
Date created : 2008-10-21