France confirms working on new finance plan

27th September 2011, Comments 0 comments

Prime Minister Francois Fillon said Tuesday that France would make new proposals to stabilise the financial crisis in the eurozone once a plan to reinforce Europe's bailout fund was in place.

Fillon gave no details of the plan, but stock markets were already reacting to rumours that Paris is preparing to recapitalise major French banks, which are seen as overexposed to risky Greek and Italian sovereign debt.

The French premier said he could only act once German lawmakers give their verdict on proposals to expand Europe's aid to Greece.

"We are waiting for Thursday's vote in the German parliament on the Greek support plan, on which our effort to fight speculation against the eurozone depends," Fillon told the French parliament.

"Once we have the result of the vote -- and in the hope that it is positive -- we will make new propositions to step up this fight," he added.

Officials, speaking off the record, said that France was pushing "strong" measures to shore up both Greece and its own banking sector, but that it will not announce them until the German parliament's verdict is known.

Still, just the rumour of a plan appeared to have reassured the French stock market, which surged up more than five percent on the day, led by recovering bank stocks. High street giant BNP Paris alone climbed 15 percent.

The German parliament is to vote Thursday on whether or not to endorse a plan by eurozone leaders to expand the European Financial Stability Facility, a bailout fund set up to help member states cope with unmanageable debts.

All 17 eurozone member states must approve the plan, but Germany's view is considered particularly important as its tax payers will be faced with much of the bill and the policy is unpopular with German voters.

© 2011 AFP

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