Bank rescue plan imminent

The French government will announce its latest rescue package for Europe's largest bank, Credit Lyonnais, later today. Just a week before the state-owned bank reveals expected record 1994 losses of Fr 10bn (£1.2bn) the government has rushed together a complex bail-out involving a Fr100bn state guarantee.

The government is battling to calm public outrage at the continuing huge drain on resources, as the debacle thrusts its way to centre-stage in the presidential election campaign.

Edouard Balladur, the prime minister, who is struggling to regain his lead in the polls, said the state would not give one more franc to Credit Lyonnais: "It has got Fr2,000 bn worth of assets and so it should sell them to get back on its feet."

Mr Balladur ordered an enquiry to find those responsible for the losses. So far, however, judicial investigations have only been launched into a small number of middle-management cases.

Alarmed by the controversy over the rescue package, traders sent shares in the largely state-owned bank plummeting 6 per cent to Fr263 on the Paris exchange, after a 7 per cent fall on Wednesday.

The government's complex plan involves the bank spinning off some Fr140bn of assets into a new holding company, which will gradually sell them. The government would underwrite the losses, being paid back later from the sales. The government has said there is a hole of Fr50bn in the bank's accounts - much larger than expected.

Karel van Miert, the European competition commissioner, said the French plan is "probably the best way of tackling the question". But it is too early to tell if it complies with EU competition rules, he said.