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President Nicolas Sarkozy vowed on Thursday to protect key companies from being swallowed up by the financial crisis as he launched a 20 billion euros ($25.05 billion) fund to help French industry.

In his latest step to give life support to the euro zone's second-biggest economy, Sarkozy said the fund would invest in viable firms in need of cash, and shore up the balance sheets of companies deemed vulnerable in the face of falling stock prices.

France's aim was to make sure the financial crisis did not trigger the disappearance of strategic French industries at a time when banks were still proving reluctant to lend and investors could make easy investments in major companies.

'The day we don't build trains, aeroplanes, automobiles and ships, what is left of the French economy? Memories. I will not make France a tourist reserve,' Sarkozy said in a speech at an aerospace supply manufacturing company near Paris.

'I want France to keep its factories, I want this process of factory relocation and outsourcing to stop and I want firms with the potential to develop to be able to do so, even if financial institutions at the moment are a little timid,' he said.

The new fund would be managed by state bank Caisse des Depots, a state bank that has been traditionally used by the government to shield companies from hostile overseas predators.

It would consist of 20 billion euros to begin with, and could grow in value, Sarkozy said, noting foreign investors, and particularly sovereign wealth funds, would be welcome to join.

France planned to raise six billion euros in debt, with the rest coming from the CDC and the state, he said.

Investments would be made in viable companies, notably small- and medium-sized enterprises unable to obtain capital from blocked financial markets, he said.

Money would also be poured into medium- and large-sized companies including those that were deemed as strategic for the economy but which would be vulnerable to takeovers due to the demise of stock values.

Bankers have noted the French investment fund is not the same as the sovereign wealth funds of oil-producing or emerging market states that typically use reserves to invest in markets abroad, sometimes with the goal of securing natural resources.

Sarkozy said the fund would be headed by Patricia Barbizet, an executive of Artemis, the holding company of billionaire investor Francois-Henri Pinault.

Source: Reuters

French Empire | Comments (2) | Thursday 20 November 2008 - 10:27:55