France will prop up ailing firms

By Helene Fouquet  |   2008-10-24  |     NEWSPAPER EDITION

FRENCH President Nicolas Sar kozy said France will create a sovereign wealth fund to aid national businesses "massively," after the global stock market rout left some companies in need of capital and at risk of being taken over.

The French government will also put on hold a tax on business investment until the start of 2010 to bolster French companies being battered by the global economic slowdown. The government will ask state-owned reinsurance company CCR to insure more credit and loans that private insurers are avoiding, Sarkozy said.

The state will "massively intervene each time a strategic company, even of small or medium size, needs shareholder equity," Sarkozy said of the new fund yesterday at a roundtable in Annecy, France, Bloomberg News reported. He called the vehicle "a public intervention fund."

Sarkozy is pressing ahead with efforts to defend companies, measures that have received lukewarm response from his European partners. He has also helped organize an emergency summit with the heads of the world's biggest economies in Washington on November 15, where he will push to overhaul rules that govern world financial markets, a position being resisted by the United States.

The French fund will raise funds in the market for its investments, Sarkozy said. Europe "mustn't be naive, mustn't leave its companies at the mercy of all predators, mustn't be the only one not to defend its interest," the French president said later in Argonay in the French Alps.