France to raise 35 billion euro 'grand loan'

20th November 2009, Comments 0 comments

France is set to unveil a 35 billion euro national loan that risks putting Paris at odds with European Union demands that it rein in its ballooning deficit.

PARIS - The money is to be spent on universities, the green economy and high-tech to propel growth.

At an Elysee ceremony, President Nicolas Sarkozy is to receive a report from a special commission led by former prime ministers Alain Juppe and Michel Rocard that decided the size of the massive borrowing and spending priorities.

France hopes to escape its year-long recession with the scheme that Juppe last week said should total 35 billion euros (52 billion dollars) despite calls from some lawmakers for up to 100 billion euros to be raised.

The Juppe-Rocard report zeroes in on seven priorities, with the lion's share -- 16 billion euros - to be spent on universities and research, four billion on the digital economy and another 4.5 billion on developing green cities, according to details leaked in advance.

Among the 17 projects are plans to expand high-speed Internet and support innovative small businesses while France's cutting-edge aerospace and nuclear industries will also get a share.

"There are two ways to poorly prepare for the future," wrote Juppe and Rocard in the report leaked to Le Figaro newspaper.

"One is to accumulate debts to finance operating expenditures and the second perhaps more important way is to forget to invest in sectors that drive the economy."

Of the 35 billion euros to be raised, 13 billion euros will come from the reimbursed bailout packages given to French banks with the remaining 20 billion to be raised on the financial markets.

The total cost of the loan is expected to reach 60 billion euros, according to Le Figaro.

When Sarkozy announced the "grand loan" in June, he said funds could be raised through public subscription but the commission in the end recommended that markets and not households be tapped for the funds.

The French have shown little enthusiasm for the scheme, with a recent poll revealing that 56 percent consider the loan "useless" compared to 27 percent who said they approved of the measure.

The loan also faces resistance in Brussels, which has asked France to rein in spending and bring its deficit down to 3.0 percent of GDP by 2013.

France's public deficit is on track to reach 8.5 percent of gross domestic product in 2010.

The president is to announce the final details of the programme in December, but expectations are that he will endorse the key elements outlined in the Juppe-Rocard report.

Sarkozy in December last year unveiled a 26-billion-euro stimulus plan that propped up the car industry and helped fund large-scale infrastructure projects such as new high-speed TGV rail lines.

That came on top of a 20-billion-euro strategic investment fund announced in November 2008 to protect French industry from foreign takeovers at a time when the economy was tanking.

Socialist opposition leader Martine Aubry has dismissed Sarkozy's national loan as a publicity stunt, saying France will "be doing what it does every day and what all countries do, that is borrow from the financial markets."

Carole Landry/AFP/Expatica

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