Page last updated at 11:53 GMT, Friday, 6 February 2009

Sarkozy defends plans for economy

Nicolas Sarkozy (6 February 2009)
Mr Sarkozy ruled out the provision of direct aid to struggling consumers

French President Nicolas Sarkozy has defended his plans to revive the French economy, saying state intervention with banks has so far cost people nothing.

Mr Sarkozy also said there would be no bonuses for executives of failing banks that have been bailed out by the state.

The government would scrap a local business tax in 2010 and was ready to consider cutting income tax, he added.

He made the comments in a TV interview, a week after nationwide protests and strikes at his handling of the economy.

A million workers downed tools to protest against what they said was an inadequate response to the global financial crisis, and to call on the government to do more to protect jobs and wages.

On Monday, Prime Minister Francois Fillon announced a 26bn euro ($33.1bn; 23.5bn) initiative designed to "revitalise" the economy.

The package comprises 11bn euros to help businesses improve their cashflows; 11bn euros of direct state investment; and 4bn euros of investment by state-owned firms in modernisation programmes.

'Shocking' pay system

Speaking in a live 90-minute television interview, Mr Sarkozy defended his government's handling of the economic crisis but acknowledged that the French people had every right to be concerned by the situation.

Naturally, I will continue to reform the country - it is the only way for France to emerge from the crisis stronger than going into it
French President Nicolas Sarkozy

"It's normal that the French are worried. It's a crisis the like of which the world has not seen for a century," he said.

"I must ensure that France enters the crisis as late as possible and gets out of it as early as possible."

The president then defended his decision to set aside billions of euros to recapitalise banks, saying it would cost taxpayers nothing.

"The money loaned to the banks will not only cost the French people not one cent, but will bring in money," he stated, adding that the state expected to earn 1.4bn euros ($1.8bn; 1.2bn) this year in interest on loans.

Mr Sarkozy announced that there should be no bonus payments this year for executives of the banks which have been bailed out.

However, he said he was "more shocked by the system of pay" for lower-level bank traders and wanted it changed.

The decision on bank bonuses follows a move earlier this week by US President Barack Obama, who said salaries at companies accepting US government money would be capped at $500,000 a year.

Continuing reform

The revenue from the loans to failing banks would be spent on social measures, he said, such as increases in family welfare and short-term unemployment benefits, or a possible reduction in income tax.

Mr Sarkozy also pledged to scrap in 2010 the local "professional tax" at a cost of some 8bn euros ($10.25bn; 7bn), which he said penalised French companies and encouraged outsourcing.

Protest in Paris on 29 January 2009
Huge crowds took to the streets to protest at the government's policies

But he ruled out an increase to the minimum wage or any provision of direct aid to struggling consumers, saying his priority was to protect jobs.

"If consumers don't spend, it's because they are fearful for their jobs," he said.

The president said he would meet trade unions and employers' associations on 18 February to discuss the response to the crisis, and that the concessions he would seek would be minor.

He added that he wanted company profits to be shared in future, saying he would like to see a third of profits handed out to employees, a third to the investors and a third going on investments.

But despite last week's protests, he said he would press ahead with his reform programme, which includes cutting taxes and slimming down the public sector.

"Naturally, I will continue to reform the country. This is the mandate I received, it is my duty," he said. "It is the only way for France to emerge from the crisis stronger than going into it."

On Friday morning, union leaders said they had been disappointed with the lack of "concrete or immediate action" presented by the president and warned that they were ready to launch new protests.

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