Stimulus plan could have spin-off for high speed rail project in Poitou-Charentes

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President Nicolas Sarkozy unveiled a 26 billion euro stimulus plan for the French economy on Thursday, targeting investment projects rather than directly aiding consumers, and this approach could have a positive effect on the planned high-speed rail link between Tours and Bordeaux.

The car and housing sectors will receive almost 3 billion euros of aid, infrastructure projects will be accelerated and firms will be rewarded for investment spending.  "This crisis is an ordeal, a painful ordeal and a terrible ordeal, but we have to keep faith in the future," Sarkozy said in a keynote speech at Douai in northern France, home of a large Renault factory.

"We will not give up our goal of sorting out our finances as soon as possible," he said, adding: "Not doing anything now would have cost us much more."  The stimulus plan earmarks 10.5 billion euros for infrastructure, research and support for local authorities.  This includes 4 billion euros for investment for state-owned rail, energy and postal companies, including a pledge to speed up projects such as a high speed train link in western France.  A further 4 billion euros will be allocated to higher education, sustainable development and defence industries.

Sarkozy pledged the state would give 1,000 euros to people who scrapped old vehicles and bought new, more environmentally-friendly models.  He also promised loan guarantees of 1 billion euros to help unblock the frozen car credit market.

The other major sector under pressure is the construction industry, with new housing starts in France plunging 21 percent in the three months to the end of the October.  Sarkozy said the state would offer 1.8 billion euros to the sector, with some going directly on building projects and some going to help low earners buy homes thanks to zero rate loans.  Some 1.2 billion euros would be spent on schemes to encourage smaller companies take on new staff.

The plan also envisages speeding up payment of 11.5 billion euros of credits and tax breaks on investment, handing out the cash in one year and not three as originally expected.  The French measures form part of an EU-wide fiscal stimulus package, with many countries adopting differing approaches to try to prevent their economies from sinking deep into recession.

While France is focusing on investment, Britain has prepared a 20 billion pound package of tax cuts and spending to help small businesses, low earners and households.  Germany has unveiled a plan worth 31 billion euros, or 1.25 percent of GDP, but is refusing to deliver tax cuts to help stimulate economic growth despite having much more room for budgetary manoeuvre than many of its neighbours.