French lower house approves bank rescue plan

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The massive bank rescue package passes first parliamentary hurdle with lower house of parliament and will be scrutinised by the upper house on Wednesday.

15 October 2008


PARIS - France's lower house of parliament approved the country's rescue package with  the upper house due to consider the proposal on Wednesday. 


The package was passed by 224 votes to 23. The opposition Socialists abstained while the Communist Party voted against.


Earlier, President Nicolas Sarkozy met French bank chiefs to discuss the massive EUR-360-billion plan, offering loan guarantees and capital to avert financial collapse in the eurozone's second economy.


Prime Minister Francois Fillon also called on the opposition to rally behind government in a show of national unity.


"We are conscious of the responsibility that we are taking," Fillon told the National Assembly (lower house).


Addressing concerns that French taxpayers could be forced to foot the bill, Fillon said the mammoth package was "temporary" and as "secure as possible".


"A payments system will be put in place to ensure that beneficiaries will reimburse the state as quickly as possible," he said.


The French plan unveiled in coordination with other European governments provides for up to EUR 320 billion in loan guarantees to overcome the credit crisis and EUR 40 billion to recapitalise fragile banks.


The Europe-wide initiative fuelled a spectacular bounce-back on global stock markets Monday, and the head of the French banking federation, Georges Pauget, said he expected the first loans to start being rolled out in three weeks.


But the Socialists called for the plan to be matched by a broader economic package to create jobs and help low-income families as a central bank forecast confirmed Tuesday that France was sliding into a recession.


"What we are doing to save the banking system should also be possible to save the French people from recession," said the Socialist leader in the National Assembly Jean-Marc Ayrault.


Sarkozy's bank rescue plan "addresses only part of the problem", said Ayrault.


The Socialist head of the National Assembly's finance committee, Didier Migaud, warned there was "a serious risk" the package would end up costing French taxpayers in the medium-term.


"No one knows today what the exact cost to the state is going to be," said Migaud.


The bank package was rolled out as the government was struggling to rein in public spending and set priorities for its 2009 budget, due to go before parliament on 13 November.


Budget Minister Eric Woerth insisted the decision to make available EUR 40 billion in fresh capital to invest in struggling banks, would not impact on the state budget, though if taken up would involve raising new debt.


And Finance Minister Christine Lagarde said in a radio interview the larger guarantee on interbank loans was designed "not only so that it does not have a cost, but so that it generates money for the state."


The French guarantee scheme involves setting up an investment agency that will borrow funds on the interbank money market and loan them on to banks, charging them for the service.


Government spokesman Luc Chatel also insisted the bank rescue would "not have an impact on French household budgets".


"We need to explain to the French people that this is not about the state writing a cheque with treasury funds. This money is already in the markets. It exists, it is just not going to where there is a need for liquidity," he said.


[AFP / Expatica]




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