Page last updated at 11:13 GMT, Thursday, 27 November 2008

France to offer credit insurance

Christine Lagarde
Christine Largarde is set to announce state-backed credit insurance

The French government is set to provide insurance to companies who offer credit to the businesses they trade with.

As the threat of insolvency increases with the slowdown, insurers are less willing to provide credit insurance.

Without this insurance against not being paid, many are unwilling to offer credit to their customers, forcing them to pay cash.

An inability to secure credit hastened Woolworth's fall into administration in the UK.

French finance minister Christine Lagarde is meeting insurance and industry leaders on Thursday and is expected to announce that a publicly owned insurer will step in to ensure that credit does not dry up.

Under the plan, insurer Caisse Centrale de Reassurance will provide cover when private insurance is withdrawn, helping companies to continue trading.

The move will be welcomed, particularly by the construction industry as delays and cancellations to projects threaten hundreds of thousands of jobs.

Foreign competitors are likely to be unhappy at the move, which would give French firms a significant commercial advantage.

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