Thursday

28th Mar 2024

Sarkozy to rescue French companies

In a fresh surge of economic patriotism, French president Nicolas Sarkozy - whose country currently holds the six-month rotating EU presidency - on Thursday (23 October) announced plans to create a "sovereign wealth fund" to aid French businesses in the wake of the global financial crisis.

The fund, which is meant to be in place by the end of the year, will be managed by the state-controlled lender, Caisse des Depots et Consignations, and "will raise part of its money by borrowing on the markets," Mr Sarkozy said in a speech in Annecy, France.

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It would inject money into French companies in difficulty, and in exchange, the French state would be allowed to temporarily buy stakes in the firms.

"Large French companies can't be allowed to fall into foreign hands just because we do not react to the financial crisis," Mr Sarkozy was quoted as saying by Deutsche Welle.

He added that more broadly, all of Europe "must not be naive [and] leave its companies to the mercy of all predators."

The French president's remarks follow calls he made earlier this week in Strasbourg for European governments to set up sovereign wealth funds similar to those developed by Norway, China and a number of oil-producing states in the Middle East to buy stakes in EU companies and keep them safe from takeovers by foreign buyers.

Corporate tax on hold

Mr Sarkozy also said the French government would put plans for a corporate tax on business investment on hold until 2010 in a bid to stimulate the economy.

"Starting from today and until the end of 2010, all new investments by companies will be completely and definitively exempt from corporate tax," he said.

But the French president's ideas have already prompted strong criticism from a number of member states, notably Germany.

"The German government believes that ... greater protection measures are not needed in Germany," government spokesperson Ulrich Wilhelm was quoted as saying by French news agency AFP.

Mr Wilhelm's words echoed those of the German economy minister, Michael Glos, who dismissed the French idea as well.

"The French proposal that the state should take stakes in European industry so as to protect it from foreign state takeover goes against the successful principles of our economic policy," he said earlier this week.

Additionally, European Commission President Jose Manuel Barroso on Tuesday warned against "giving in to siren calls for protection" in Europe in the wake of the crisis.

Sarkozy - eurozone president until 2010?

Meanwhile, another of Mr Sarkozy's recent proposals – to set up an "economic government" for the EU countries using the euro, which would gather regularly heads of state and of government, has also ruffled some feathers.

More fuel to the fire has been added by a report in French daily Le Monde - quoting several advisors to the French president - that Mr Sarkozy may want to lead such a "government" himself and remain at the head of the so-called euro group until another EU country using the single currency takes up the rotating EU presidency.

Neither the Czech Republic nor Sweden, scheduled to hold the EU presidency in the first and second halves of next year, employ the euro. Spain does however, and takes over the presidency in 2010.

French EU affairs minister Jean-Pierre Jouyet added to such speculation on Thursday by telling a group of journalists: "Do we want to return to business as usual? Or do we want to capitalise on the impetus given to the euro zone?" the Irish Times writes.

The Czech Republic has reacted angrily to the idea.

"Nobody can take the presidency away from the Czech Republic. There are formal rules of the game which cannot be changed without the consent of everyone," Czech deputy prime minister Alexandr Vondra said in a statement on Thursday.

"If the euro group agrees to be presided over by a Frenchman and to meet more frequently, most probably we will not be able to prevent this. However, it would not be a wise move, but one which would divide [the] EU rather than unify it," he added.

Earlier, Mr Glos also told French daily La Tribune that a single economic governance of euro zone countries is "not suitable for resolving the current problems."

In the meantime, EU heads of state and of government will meet for an informal lunch on 7 November in Brussels in order to prepare for a larger international summit on the financial crisis that will take place on 15 November in Washington.

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