Sarkozy suspends corporate tax on new investments

He also announced the creation of a ‘strategic fund for national investment’, similar to sovereign wealth funds in the Gulf, China and Russia, to support French industry.

‘Starting from today and until the end of 2010, all new investments by companies will be completely and definitively exempt from corporate tax,’ Sarkozy said in a speech on efforts to cushion the impact of financial woes on the real economy.

The French state has already earmarked 360 billion euros ($461.8 billion) to prop up the financial sector, as part of an international effort to help banks survive the worst financial crisis since the Great Depression in the 1930s.

Sarkozy has been under pressure to complement the rescue plan for banks with measures to stimulate economic growth. There had been talk of a plan to support the job market, but no measures specifically aimed at employment were announced.

Sarkozy said that at a time when states were being called upon to take a more active role in the economy, France should set up its strategic investment fund by the end of the year.

‘It will be a powerful lever in our industrial policy. The idea is not to rescue out-of-date businesses but to invest in the future, to contribute capital to finance innovative and audacious industrial projects,’ he said.

The fund's role will also be to protect companies that could be tempting prey for ‘predators’ keen to take advantage of low share prices to snap them up and take them apart.

The fund will not remain forever in companies' capital, Sarkozy said, but rather take temporary stakes before selling them off for a profit.

‘The fund will raise part of its money by borrowing on the markets. That will contribute to move cash around and to orient it towards industrial development rather than purely financial speculation,’ Sarkozy said.

He said the Caisse des Depots et Consignations, a publicly owned savings bank at the heart of the state's financial operations in the economy, would manage the future fund.

Sarkozy told the European parliament on Tuesday that Europe should have its own sovereign wealth funds to take stakes in companies stricken by the global financial crisis.

He reiterated in his speech on Thursday that he would encourage other European countries to create such funds, arguing that EU members should coordinate their investment policies for the bloc to have a coherent industrial policy.