The French government will inject a total of 10.5 billion euros (US$14 billion) into the country’s six largest banks by the end of this year to help counter the effects of the global financial crisis, Finance Minister Christine Lagarde said on Monday.
The Finance Ministry said the capital injection was part of the French government’s 360 billion euro rescue plan aimed at unblocking credit markets and ensuring the country’s banks do not collapse.
“In exchange for this measure, they must commit to a target of increasing loans to the economy in order to guarantee a degree of financing in line with the needs of individuals, companies, local government and professionals,” Lagarde told reporters after a meeting with banking leaders.
The government has agreed to buy 3 billion euros in subordinated debt issues from Credit Agricole, 2.5 billion euros from BNP Paribas and 1.7 billion euros from Societe Generale, the Finance Ministry said in a statement.
The government has also agreed to buy 1.1 billion euros in unsubordinated debt from the Caisse d’Epargne.
The remainder will go to Credit Mutuel and Banque Populaire.
News emerged on Friday that the Caisse d’Epargne had lost 600 million euros trading derivatives amid the worldwide stock market collapse earlier this month. The top three executives at the bank resigned over the weekend.
A majority of French people do not believe the government’s rescue package of the country’s banking sector will work, an opinion poll published late on Monday showed.
Fifty-six percent of people questioned said the measures introduced by the government would “not really” or “not at all” restore lasting confidence among investors.
A further 59 percent of people said the measures would “not really” or “not at all” ensure a return to economic growth.
Meanwhile, 79 percent of French said that if the government “can loan US$40 billion to banks, it can afford to pay more to the poorest within society.”
Sixty-seven percent also concluded that the crisis proves the current liberal economic system has failed and should be changed.
A majority of people (59 percent) continue to oppose the government’s economic policy, although less than in preceding months.
The survey was commissioned by the international program Business Volunteers for the Arts (BVA), business daily Les Echos and France Inter radio station.
The poll was made up of a sample of responses given by 1,014 people, selected by a quota system, who were questioned over telephone on Friday and Saturday.
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