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Last Updated: Monday, 6 June, 2005, 14:21 GMT 15:21 UK
Paris sells France Telecom shares
France Telecom shop
France Telecom is Europe's second biggest fixed-line operator
The new French government is to sell up to 8% of France Telecom, with the aim of raising 4.5bn euros ($5.5bn; 3bn).

Analysts say the government needs the money to help reduce its budget deficit and tackle unemployment.

France's jobless level currently stands at 10.2%, while the country has exceeded the eurozone's budget deficit limit for three straight years.

The government sold 10% of Europe's second biggest fixed-line operator last September for 5.1bn euros.

Political move

The current sale will reduce the government's share in the company to between 33.1% and 34.9%, depending upon whether it settles for a sale of 6% or 8%.

"The timing of this (France Telecom) placing is political," said Matthieu Cordier, an analyst with ABN AMRO in London.

Mr Cordier said France's centre-right government also hoped to announce part-privatisations of state gas utility Gaz de France, power giant Electricite de France and nuclear firm Areva.

France Telecom was being dealt with first, Mr Cordier said, because the other utilities were more politically sensitive, with stronger unions apposed to privatisation.

The reshuffled French government of Dominique de Villepin has pledged to remain a "significant shareholder" in France Telecom in the medium term.

The eurozone's budget deficit limit says that a nation's annual deficit must be no more than 3% of its gross national product.

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