Sarkozy defends reforms against financial storm

Business Materials 25 September 2008 22:37 (UTC +04:00)
Sarkozy defends reforms against financial storm

French President Nicolas Sarkozy is to make the case for continuing economic reforms on Thursday despite the global financial crisis and flagging growth that is sharply reducing his room to manoeuvre, reported www.ttc.org.

Back from his foray on the world stage at the United Nations in New York, Sarkozy travels to the southern city of Toulon, speaking directly to the people in a major address on the economy.

The president is to outline how France intends to confront the worst crisis in financial markets since the 1929 Wall Street crash that ushered in the Great Depression.

Sarkozy will show "there is a captain at the wheel" and "give some perspective on the government's economic policy", an aide said of the speech to be delivered at 6:30 pm (1630 GMT) before 4,000 people.

A recent poll showed 62 percent of the French disapprove of Sarkozy's handling of the eurozone's second biggest economy although his overall approval rating has edged up in the past weeks.

On Tuesday, he called for an international summit on the financial meltdown to discuss creating a new system of "regulated capitalism", during an address to the UN General Assembly.

In his first comments since the collapse of US investment giant Lehman Brothers 10 days ago, Sarkozy appealed for "a regulated capitalism in which whole swathes of financial activity are not left to the sole judgment of market operators."

There was speculation that the president could announce some measure to curb the "golden parachute" severance payments to chief executives after France's top business lobby, the Medef, said it would recommend such a step.

The Toulon speech comes on the eve of the release of the 2009 budget to the cabinet, capping weeks of tense juggling to set priorities in the government's reform programme.

Finance Minister Christine Lagarde has forecast growth for next year at "around one percent", lower than the 1.25-2.25 percent figure predicted earlier this year.

Sluggish growth translates into a loss of revenue for the French state, which is already five billion euros (7.4 billion dollars) in the hole from the economic slowdown in 2008, according to finance officials.

Sarkozy won election in May 2007 on a pledge to "inject fuel" into the economy with tax cuts and measures to free up growth, that he has repeatedly lamented is lagging behind France's eurozone partners.

Budget Minister Eric Woerth has warned that 2009 will be a "difficult year" but that the government would not backtrack from its commitment to reduce public spending.

France has pledged to balance its books by 2012, missing a European Union target of 2010 for governments to rein in spending and reach a balanced budget.

Economists question whether this can be achieved in the current difficult context, with French households hard hit by inflation and increasingly worried about their living standards.

Purchasing power has replaced unemployment in public opinion polls as the nation's number one concern.

The public deficit is expected to reach 2.7 percent of GDP this year, slightly higher than the 2.5 percent forecast. The government had set its sights on a deficit capped at 2.0 percent for 2009.