Speaking to business leaders in the city of Annecy in eastern France on Thursday, President Nicolas Sarkozy announced the creation of a sovereign wealth fund to help strategic national businesses struggling amid the global financial crisis.
President Nicolas Sarkozy announced the creation of a French sovereign wealth fund on Thursday as employers warned that the credit crunch is pushing many firms to the brink of failure.
Sarkozy promised the fund would "intervene massively" in order to protect any strategically important firms threatened by the global credit crunch, amid a raft of measures to help French industry survive the crisis.
"I will ask parliament to adopt these measures extremely rapidly," he told business leaders meeting in Annecy in the mountains of eastern France.
According to a report in the daily Le Figaro citing presidential aides, the new 200-billion-euro (256-billion-dollar) fund will be created by merging existing state intervention funds and stakes in public enterprises.
Sarkozy said it would be a "public intervention fund which will intervene massively every time a strategic enterprise needs equity capital," and promised to lead other European governments down the same path.
He also announced two-year on a moratorium on a 3.5 percent local business tax for new investment and the creation of the post of a "credit mediator" to oversee talks between struggling firms and nervous lenders.
French banks, in exchange for a 260-billion-euro pacake of state funding and loan guarantees, have promised to increase their lending to private firms.
Sarkozy's latest measures come as France has attempted to take the lead in Europe in meeting the challenge of the global financial crisis triggered by the collapse in the US domestic mortgage market.
Leaders of the G20 group of the world's biggest economies are to meet next month in Washington to, in Sarkozy's phrase, "refound the global financial system", but in the meantime are managing their local problems.
Official forecasts already show France is in its second quarter running of negative growth -- a technical recesssion -- and Thursday brought more grim news for those still clinging to hope of a rapid recovery.
"The financial crisis is endangering, sometimes threatening with death, many French firms, in particular medium, small and very small businesses," said the head of the employers' association, Laurence Parisot.
Parisot made her warning in a letter to Prime Minister Francois Fillon in which she urged him not to impose any new taxes or social charges and to drop plans to expand a scheme to make firms pay employee travel expenses.
"For all of us, what is at stake is avoiding a deep recession," she said.
Separately, the state statistics agency INSEE revealed a drop in its monthly index of business confidence from 91 to 88 points -- putting it at its lowest level since 1993 -- and warned of worse to come.
Bosses surveyed by the agency complained of shrinking order books, rising stock levels and an expectation of a further slowdown in the coming months.
The French economy shrank by 0.3 percent in the second quarter of the year and earlier this month INSEE forecast that gross domestic product would drop by a further 0.1 percent in both the remaining quarters of 2008.
Economists define a recession as two quarters running of contraction in the economy but so far the French government, despite revising downward its own growth and spending predictions, has steered clear of using the term.
Date created : 2008-10-23