France’s sovereign wealth fund to boost economic securityOctober 28th, 2008 - 10:50 am ICT by IANS
Paris, Oct 28 (Xinhua) France’s plan to create a sovereign wealth fund is a part of the country’s efforts to guarantee its economic security in the current world financial crisis.The fund, announced by French President Nicolas Sarkozy last week, is designed to protect the strategically important French enterprises threatened by the global credit crunch and prevent those companies from foreign takeover, the latest manifestation of economic patriotism of the country.
Stock markets in Europe had plummeted in world financial meltdown. France’s CAC40 (companies which do two-thirds of their business and employ two-thirds of their workforce outside France) slid nearly 50 percent.
The market value of French firms including French electricity firm EDF, Total Fina Elf and Alcatel-Lucent dropped half this year.
The sovereign wealth fund will help prevent the companies, especially those of strategic importance in the field of energy, automobile manufacturing, aerospace, defence and the like, from falling into the hands of foreign competitors when their stocks plummeted.
France has a tradition of economic patriotism. French government would intervene massively in need if companies of strategic value fall into trouble.
The latest example was the merger of the energy giant GDF-Suez of France in July. French government tied up the merger of Suez and state-owned Gaz de France, giving the country another world energy champion in a sector that Paris was eager to protect from Italian predator Enel.
The rescue of Alsthom, one of the global leaders in equipment and services for power generation and rail transport, was another manifestation of economic patriotism of France.
The company was bailed out of near-certain bankruptcy, thanks to efforts from the French government and creditor banks. The French government also helped the struggling Alsthom get more overseas orders during the visits of the French president or prime minister to other countries.
The ongoing financial crisis started from the US housing loan market last year. The United States and the European countries have been particularly hard hit by the crisis, forcing governments of some countries to take further steps to defend their currencies and financial systems.
The total amount of sovereign wealth fund of France is still uncertain. The fund would initially reach approximately 100 billion euros ($124 billion), according to some French officials. But it was denied by French Finance Minister Christine Lagarde later.
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