France to unveil risky 'Big Loan' spending plan

Electric cars, wind power and broadband internet are among the industries already lining up for their share of France's so-called “Big Loan” program, a euro35 billion (US$52 billion) public spending plan dreamt up by President Nicolas Sarkozy as a way to fuel France's long-term economic growth.

Even a club that lobbies for more cycle lanes in cities is asking for euro500 million.

A commission charged last summer with coming up with a list of “strategic priorities” for the new spending is scheduled to present its report to Sarkozy Thursday.

The French president launched the loan idea last summer in a speech to both houses of parliament gathered at the Chateau de Versailles. After spending euro26 billion (US$39 billion) in stimulus to offset the global financial crisis, Sarkozy said France needed to raise billions more to invest in the country's long-term growth, “because without investment there is no future.”

Initial estimates of the size of the loan program ranged up to euro100 billion, but last week one of the commission's co-presidents, former Prime Minister Alain Juppe, said the commission had settled on a total “investment” of euro35 billion.

Part of this could come through recycling the euro13 billion that France's banks have repaid the government after it propped them up with billions of euros during the worst of the financial crisis.

The government could still have to borrow around euro20 billion to finance the investments suggested by the commission. Sarkozy will have the final say in both the size of the loan and how it will be spent, which he is expected to lay out in early December.

France's universities could be among the biggest beneficiaries of the “Big Loan,” with up to euro10 billion potentially earmarked to set up endowments on the model of some U.S. universities, according to French press reports.

Other sectors expected to be favored for investment are innovative small and medium-sized companies, renewable energy, electric vehicles and broadband and other digital technologies.

All this new spending, when France's debt and deficit are already at record high levels, has attracted criticism both from the country's opposition Socialist party and from within Sarkozy's governing conservative UMP party.

The French people apparently remain unconvinced of the plan's benefits. A poll this month showed that 54 percent of respondents opposed the plan, and only 39 percent supported it.

The plan risks angering European officials, who have urged countries to rein in their stimulus spending now that the continent has begun to pull out of its worst recession in the postwar era.

Last year, France spent euro55 billion servicing its total debt of euro1.3 trillion. France's Cour des Comptes, the government's audit body, warned in its June report that it is “urgent” for France to reduce spending.

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