France's Hollande speeds launch of state investment bank

Reuters News
Posted: Aug 31, 2012 2:44 PM
France's Hollande speeds launch of state investment bank

CHALONS-EN-CHAMPAGNE, France (Reuters) - France will launch a public investment bank within days to help cash-strapped companies obtain financing, President Francois Hollande said on Friday, bringing forward the date as his government speeds up efforts to fight a downturn.

The bank, originally due to be launched in January of next year, is designed to support small- and medium-sized firms which are struggling to obtain financing from private lenders amid tight credit conditions.

"A public investment bank will be created in the coming days," Hollande told journalists in north-eastern France. "There is no time to wait: we are facing too many emergencies."

The Socialist leader scrambled this week to bring forward some of his key economic reforms after he came back from two-weeks of summer holiday to find his ratings plunging largely over mounting fears about record unemployment and the stagnating economy.

France is also fast-tracking the launch of a scheme to create 150,000 state-sponsored jobs for youths, in a move to tackle rising unemployment.

The new body brings together several existing public lenders under the state bank Caisse des Depots, aiming to offer thousands of credit-hungry companies business advice as well as a single window for loans.

"Pulling together all these different institutions under a single roof is not only a good thing, it's an urgent move for France," said Frederic Bonnevay, an economist for think tank Institut Montaigne.

In July, Industry Minister Arnaud Montebourg told Le Parisien daily that a public bank was necessary because private lenders were not "sufficiently interested" in the real economy, preferring to seek higher margins abroad.

Montebourg has since been involved in a controversy surrounding the choice of a private adviser for the new institution - Franco-American investment bank Lazard.

Le Nouvel Observateur magazine, hinting at a possible conflict of interest, reported this week that Montebourg was behind the choice of Lazard, whose head of French operations, Matthieu Pigasse, is an outspoken ally of the Socialist Party.

Pigasse also owns the magazine Les Inrockuptibles, which named Montebourg's wife as its editor-in-chief in July.

Montebourg has said he played no role in choosing Lazard, and told journalists that he thought its nomination was a "very bad idea".

"I was not informed of this choice," Montebourg said at a meeting of business leaders near Paris. "I am not in favor. Why? Because, in order to launch a bank, you should certainly not ask for the advice of other bankers."

Finance Minister Pierre Moscovici said on Thursday that he bore sole responsibility for the choice of Lazard, which also brought criticism from conservative political opponents.

Moscovici defended his choice of Lazard on Friday saying that there was no conflict of interest and that Pigasse's bank had not benefitted as a result of his support for the Socialists.

"Lazard was chosen through a tender without any political intervention," Moscovici said on Europe 1 radio.

Hollande said that, alongside the creation of a public bank, France would pursue reform of private banking to separate retail operations from investment and trading, as he had promised in his election campaign.

(Reporting By Elizabeth Pineau, Yann Le Guernigou and Leigh Thomas additional reporting and writing by Nicholas Vinocur; editing by Stephen Nisbet)