Britannia Radio

EU OBSERVER       10.2.09
France to rescue domestic car industry
LEIGH PHILLIPS

France on Monday (9 February) announced ?6.5 billion in loans to 
three national automobile manufacturers in a bid to save jobs.

President Nicolas Sarkozy announced that Peugeot-Citroen will receive 
?3 billion in preferential loans, as will Renault.

Renault Trucks, which, while based in France, is actually own by AB 
Volvo of Sweden, will receive ?500 million in loans.by Google

The negotiated quid pro quo is a pledge to keep the car factories 
open, maintain jobs and produce 'green' cars.

The bail-out agreement will also restrict executive bonuses and cap 
dividends, according to industry secretary Luc Chatel.
"This is not a gift. It is not a subsidy. It is a loan offered at an 
interest rate of six percent," Mr Sarkozy said of the disbursements, 
which will be doled out over five years.
"Renault and PSA have made a commitment ... to close no sites over 
the duration of the loan and to do everything to avoid redundancies," 
he added.
Some ten percent of the French work in the car sector, making it one 
of the biggest employers.

Britain, Germany, Italy and the US too have all committed public 
funds to aid their own car sectors.

Last month, the UK supplied car companies and parts manufacturers 
£1.3 billion (?1.5bn) in loan guarantees from the European Investment 
Bank, along with a direct £1 billion (?1.1bn) from public funds. Also 
in January, Berlin committed ?1.5 billion to its car producers, in a 
plan to encourage new car purchases.

Italy's $1.7 billion (?1.3bn) plan for its car firms is similar to 
that of Germany, offering consumers ?1,500 if they trade in their old 
car for a greener replacement.

The more expensive French move however is already raising warnings of 
a trend towards economic nationalism.
"The fragile economic prospects of every WTO member have become 
especially vulnerable to the introduction of any new measure that 
closes off market access or distorts competition," said the director 
general of the World Trade Organisation, Pascal Lamy, in response to 
the French bail-outs at a meeting of ambassadors to the WTO in Geneva.
"We must remain vigilant," he added.

The European Commission too has reacted with caution.

"The commission will need to scrutinise very carefully details of the 
subsidies, the conditions attached, to make sure of their compliance 
with state aid and single market rules," commission competition 
spokesman Jonathan Todd said on Monday.