Cash deal may let France into single currency

The French government will announce a huge transfer of funds to the general public purse from France Telecom in its forthcoming budget in a bid to scrape into the list of countries qualifying for the single European currency from the start.

The state-owned telephone company is to give the government Fr37.5bn (pounds 4.7bn) in the next financial year in return for the transfer of its pension liabilities to the public sector budget before it is privatised.

The planned switch of funds from France Telecom is equivalent to 0.5 per cent of France's GDP and could be enough to make the difference between success and failure in the country's efforts to qualify for the single currency. Next year is the deadline for countries to meet all the requirements set out in the Maastricht Treaty if they want to join at the 1999 start date.

Although the EU Commission has predicted that France will just hit the 3 per cent of GDP target for its government deficit, most other forecasters think lacklustre economic growth means the shortfall will be much bigger.

The French proposal has been criticised by analysts in the financial markets. Julian Jessop, European economist at investment bank Nikko in London, said: "What they are proposing is against the spirit of the Maastricht criteria. It should not be allowed by the European Commission, but it might well be."

The transfer of cash now in return for future pension payments meant the deal was equivalent to issuing government debt, and not a real reduction in the deficit at all, he argued.

A spokesman for the EU's monetary affairs commissioner, Frenchman Yves- Thibault de Silguy, said the commission had not yet taken a definitive position on the planned transfer. Officials would make an objective decision on whether the proposal would reduce the French government deficit in a sustainable way, but not before Prime Minister Alain Juppe's government had presented the full details.

The French budget, due on 18 September, is widely expected to trigger another autumn and winter of unrest as the government tries to introduce expenditure cuts that will bring its deficit below the 3 per cent ceiling. But attempts to take liberties with the budget arithmetic are unlikely to go down well in the financial markets.

The news of the French move came as British businessmen issued a plea for the UK government to take a more active part in negotiations on the single currency. A group of leading industrialists warned yesterday that ruling out membership would put Britain at a competitive disadvantage.

The normally Euro-sceptic Institute of Directors agreed. Tim Melville- Ross, director general, said: "It would be quite wrong to rule out membership irrevocably."

Chancellor Kenneth Clarke fully supported the business plea. "We in Britain, as key players in this big European market, in our modern global economy, have got to be there playing a part and discussing it and making sure our patriotic British interests are defended," he told BBC Radio.

Comment, page 21

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test