The French state is to help cover the credit insurance needs of viable companies so that they are not left in the cold by credit insurers worried about rising defaults as the country heads into recession. Credit insurance firms that might look at a company and decide only to fully take on half of its risk could soon enlist state-owned Caisse Centrale de Reassurance to take up 50 percent of the remainder, said Economy Minister Christine Lagarde.
The move is the latest in a series of steps taken by France to foster confidence in the economic system and help companies, mainly those small and medium in size, to weather a painful slowdown in economic activity and the global financial crisis. Although France reported growth of 0.1 percent in the third quarter, bucking a trend of contracting growth in some of its European neighbours, economic activity has wound down rapidly and analysts say the county is bound to suffer a recession.
"The state is intervening by giving its support...given the current worsening in risks that will create particular difficulties for some companies," Lagarde told a news conference. French officials said the move, which will take effect next month and have an initial shelf life of six months, was the first of its kind in Europe since the onset of the financial crisis. The measure will ensure that companies wishing to subscribe to credit insurance and that supply goods to other firms on deferred payment terms can continue to be protected against potential defaults by their clients.