France launches pounds 4bn package to aid economy

THE French government yesterday launched a Fr35bn (pounds 4bn) package to boost the economy, part of a strategy to help confidence and reassure the markets that the cEountry could withstand raising interest rates to support the frTHER write erroranc, writes Andrew Marshall.

The measures will be financed from the cash generated by the bond issued earlier this month. It was heavily oversubscribed and raised almost three times the Fr40bn target. The windfall will allow Fr35bn to be paid to companies to offset advance VAT payments. The measure goes further than foreseen in a mini-budget.

Another Fr20bn will be used next year to boost investment, jobs and growth, while Fr15bn will be spent on local authority projects.

Economists in Paris said that the government was signalling a switch away from a mix of a relaxed monetary stance and a tight fiscal policy designed to bring the budget deficit under control. With a projected shortfall this year of about Fr340bn, France's fiscal record is considerably better than that of Britain.