Monday 3 September 2012

Bank bailout may cost President Hollande

(Full story)

By Lionel Laurent and Leigh Thomas

PARIS (Reuters) - A state lifeline to wind down a small, ailing French mortgage lender is likely to carry a political price for President Francois Hollande as he grapples with rising unemployment and economic slowdown, even though there is no immediate budget hit.

The government promised over the weekend to guarantee Credit Immobilier de France's debt, putting an end to the bank's vain search for a buyer after credit rating downgrades drove it into a funding wall.

Unlike Franco-Belgian bank Dexia, which was also rescued with guarantees in the wake of the eurozone debt crisis, CIF is profitable and can be wound down gradually without requiring an injection of taxpayer money, bankers said Monday.

But the bailout risks giving voters the impression that the Socialist president is going soft on the financial sector after promising during his election campaign to crack down on the industry for perceived excessive risk-taking and lavish bonuses.

The daily Le Monde highlighted the irony with a cartoon showing Hollande rescuing a drowning CIF banker while recalling his campaign mantra that "my adversary is the world of finance ... but I don't like seeing people suffer".

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