Bail out passes first hurdle
What we are doing to save banks could be done to save people from recession, say Socialists MPs.
The government bank has been voted through the National Assembly.
President Nicolas Sarkozy met with bank chiefs to discuss the massive €360billion plan, offering loan guarantees and capital to avert financial collapse in the eurozone's second biggest economy.
Socialist Party MPs and Greens abstained in the vote while the Communists voted against what they termed "a bonus to thieves to save capitalism."
While the package was all but sure to pass in both chambers dominated by the governing UMP, Prime Minister François Fillon called on the opposition to rally behind the government in a show of national unity.
"We are conscious of the responsibility that we are taking," Fillon told the National Assembly.
Addressing concerns that 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 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.
Socialist MPs are calling for the plan to be matched by a broader economic package to create jobs and help low-income families as a central bank forecast 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.
He said the bank rescue plan only addressed part of the problem.
The Socialist head of the National Assembly's finance committee, Didier Migaud, warned there was "a serious risk" the package would end up costing 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, set to go before parliament on November 13.
Budget Minister Eric Woerth insisted the decision to make available 40 billion euros in fresh capital to invest in struggling banks, would not impact on the state budget, though if taken up would involve raising new debt.
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 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.
Photo:Afp
