Sarkozy puts €20bn barrier around industry

President Nicolas Sarkozy on Thursday earmarked €20bn ($24bn) for a new state investment fund to protect France’s strategic industrial assets from the credit crunch or foreign takeover.

The new fund – to be managed by Caisse des Dépôts, the state-backed finance house – would be among the 20 largest long-term investments funds in the world, Mr Sarkozy said.

But, only €6bn ($8bn, £5bn) of the €20bn will be in cash for immediate investments, the rest being largely publicly held shareholdings that are unlikely to be sold in the short or medium term.

Mr Sarkozy said the new fund would have two functions: help companies that could not find finance for their investments because banks were too “timid” and safeguard the capital of “strategic businesses”.

“The day we stop building trains, aircraft, cars and ships, what is left of the French economy?” the president said in a speech in Montrichard, in the Loire valley. “I will not turn France into a reserve for tourists.”

Mr Sarkozy underlined his determination to support French industry by unveiling the fund’s first investment – an €85m stake in Daher, a supplier of components to the aerospace, automobile and nuclear industries.

Of the €20bn earmarked for the fund, €6bn will be raised on the markets with the backing of the state or the Caisse des Dépôts. It is this money that will be used immediately to invest in companies at risk of closure or foreign takeover at depressed prices.

The remaining €14bn will be large shareholdings in French companies. Officials said it had not yet been decided how much would be transferred from the Caisse de Dépôt’s existing collection of stakes, which were worth €20bn at the end of last year.

Mr Sarkozy said government stakes in Renault, Air France and the Chantiers d’Atlantique shipyard could be transferred to the fund.

Officials said the job of managing the new fund would mean a shake-up of the role of the Caisse de Dépôts. In recent years, it has acted as a large long-term shareholder in half of the companies in the CAC40.

Now it will be expected to act more nimbly, taking short-term stakes in smaller companies deemed of strategic industrial interest.

It will also come under closer government control. Traditionally, the Caisse managed its own investments at arms-length and reported to parliament. But the government will become a minority shareholder in the new fund.

Mr Sarkozy sought to allay concerns the fund would not invest along economic lines or that it heralded the return of state-managed capitalism. The fund would not buy into unviable companies and would only take minority stakes.

He named Jean-François Dehecq, chairman of Sanofi-Aventis, as head of the fund’s advisory board and Patricia Barbizet, the chief executive of Artemis, holding company of François Pinault, as head of its investment committee.

Mr Sarkozy also said the fund would be prepared to form alliances with foreign long-term investors. He did not repeat his warning against foreign “predators” made when first unveiling the fund last month. “There are perfectly respectable sovereign wealth funds,” he said. “They are welcome.”