France debates post-recession national loan

Debate heated up in France yesterday over the size of a new investment fund to spur economic recovery as Finance Minister Christine Lagarde warned against launching an over-ambitious national loan.

President Nicolas Sarkozy announced the "grand loan" for strategic investment in June during a landmark speech to both houses of Parliament but did not set a figure for the programme.

A special commission has floated the figure of €30 billion but a group of lawmakers this week said it would be a "historic mistake" to aim for anything less than €100 billion.

Ms Lagarde said France must keep an eye on its deteriorating public finances as it decides how much money will be raised for such investment projects as high-tech transport and third-generation biofuels.

"If we do something too big, just for the sake of making a big gesture, we risk deteriorating France's rating," said the minister on LCI television.

"We shouldn't let this be a source of controversy," she said. "It's petty bickering."

The commission headed by former prime ministers Alain Juppe and Michel Rocard met yesterday to agree on the size of the loan and investment priorities.

The panel is expected to present its final report next week, detailing the best options for the programme that Mr Sarkozy hopes to launch next year.

Commission members have already said they are in favour of taking the loan from the financial markets instead of a public subscription.