Priorities financed by the national loan – Preliminary statement by Nicolas Sarkozy, President of the Republic, at his press conference (excerpts)

Paris, 14 December 2009

(…)

Today, we must prepare France for the challenges of the future so that our country can take full advantage of the recovery, so that it’s stronger, more competitive and creates more jobs. We have to invest to make up for time lost due to the crisis. Investment spawns technical progress, the engine of growth.

Since 1974, the share of investment in public expenditure has dropped from 12.5% to 7.5%. These figures are unignorable, they’re indisputable and need analysing before we can resolve the problems they raise for our country. We have constantly sacrificed investment. This is a mistake: the private sector can’t do everything, because it works to a different timescale. Without the State, would we have developed the nuclear power programme or TGV?

So we’ve decided to mobilize €35 billion which will be devoted exclusively to the priorities of the future, in line with Alain Juppé and Michel Rocard’s recommendations. Consequently, we’re going to trigger €60 billion of public and private investment in five priority areas, which echo – to a very large extent, moreover – the Commission’s recommendations: higher education and training, research, industry and SMEs, digital economy and, finally, sustainable development.

First priority: higher education and training.

We are allocating €11 billion to this. Another unignorable truth: our country has neglected its higher education for too long while in fact it’s the key to future competitiveness. Here again it’s very simple, you know, the figures are unignorable. In 2006, proportionately we invested half as much as the United States in higher education. Half as much. I’m going to give you another unignorable figure. In France, higher-education expenditure as a percentage of GDP decreased between 1995 and 2006.

We have to break with this trend. In 2007, the higher-education budget was €11 billion; since then, annually, as I pledged in the presidential campaign, government investment has been increasing by €1 billion each year.

In five years, if we add in the “Plan Campus” (1), this will mean an extra €20 billion for higher education. (…)

With the national loan, we’re going to give our universities the resources to achieve excellence. Our goal is simple: create around ten campuses where we excel, with the resources, critical size and links with industry allowing them to rival the world’s best universities.

€8 billion will go to this in line with strict criteria drawn up by an international panel. (…)

The only condition we’re setting is global excellence, adoption of the new method of running universities, contractualization – I’ll come back to this – autonomy, partnership with industry and, obviously, results. But France is giving herself unprecedented resources in order to have world’s best universities because with the world’s best universities we are preparing ourselves to win the competitiveness battle.

So, after a rigorous selection process and perhaps even a probationary period, these universities will receive grants of around – I don’t want to commit myself too much (…) – €1 billion which will be theirs to manage. These sums will be used to buy cutting-edge equipment, but the bulk will go to providing them with revenue-generating capital as happens in the countries with the world’s best-performing universities. This is the first time, I think I can say, that universities will be given full ownership of their funds. The fact that they didn’t have this before was one of their major problems.

For the first time, French universities will benefit from predictable resources, which, by definition, won’t be subject to the vagaries of budget decisions.

Our effort won’t be confined to higher education. We have to develop apprenticeships and excel here too. (…)

Also we have to invest to give everyone the opportunity of access to the best educational facilities. Here, as you know, the special boarding schools (internats d’excellence) are, to my mind, a priority because they give [bright] children from modest backgrounds the right environment in which to live and study. We are going to create a further 20,000 places with the money we are mobilizing here. (…)

Second priority: research. €8 billion.

France has some cutting-edge laboratories; we are allocating significant resources to public research and are proud to have received several Nobel prizes in scientific subjects. But we suffer from a lack of coordination between efforts as well as the too-frequent existence of a barrier between research and business.

So we are going to develop research equipment, beef up the competitiveness clusters and increase our effort in such vital spheres as bio- and nano-technology.

I’d like to stress two essential dimensions.

The first is the exploiting of the research results. We are champions when it comes to discoveries, but lag far behind when it comes to patenting them. So we need to get our laboratories to work with a view to industrial applications. We are going to allocate €3.5 billion out of the €8 billion budget to this. We are going to provide capital for a small number of companies established on the major campuses (…). We’re going to earmark €3 billion for these companies responsible for exploiting research results, i.e. those which get the patents and make them usable by industry. They are the interface between the major industries and research.

The second priority is health and biotechnology, to which we will allocate €2.5 billion of the €8 billion. Concretely, I say this to the Health Minister, this means more money for research into cancer, genetic diseases, and Alzheimer’s, which blights tens of thousands of families every year, and AIDS! There’s one project particularly dear to me: the university hospital project which I had announced when I went to the Paul Brousse hospital where they do liver transplants. Our idea is to bring together international research teams to work on specific coherent scientific projects. We will allocate €850 million to them. A first call for tenders will be made in 2010 and we will select the first five university hospitals. In other words, our idea is to make five university hospitals world leaders. You see that our idea, as the Commission advocated, is to focus a lot of resources on a small number of teams to achieve global excellence, and of course, attract to us all the advantages of first place in the global competition.

Third priority: industry and SMEs. €6.5 billion.

Here too, I’m going to give you figures, but not in order to be unpleasant, it’s so that people understand the gravity of the diagnosis. Our competitiveness has been eroded. One figure is pretty shattering. The proportion of French exports in euro area exports – I’m not even talking about Asia – has fallen by 25% over the past ten years. Ok, some may not know these figures, but if we don’t agree on the diagnosis, how can we find the solution. 20% down over the past ten years. It may be argued that it’s the others who have progressed. But at the end of the day, we have lost market shares not to the new emerging countries, not to Brazil, India or China, but to our European neighbours, our friends. For the first time, this year, France’s share of euro area exports is improving. Not enough, since we are moving from 13.2% to 13.5%. And in 2009 our trade deficit will be at least €10 billion lower than in 2008, but it’s insufficient. We have to do far more.

Since 2007 we have made a massive effort for industry. With the reform of the crédit impôt recherche [R&D tax credit] we have become one of the most attractive countries for research activities. Thanks to the reform of the taxe professionnelle [local tax on operating businesses] companies are going to see an average 36% reduction in their local taxes.

The national loan gives us the opportunity to go further.

We are going to help the sectors where we excel to prepare the future. Aerospace, space and the car, rail and shipbuilding industries. Manufacture electric vehicle batteries with a range of several hundred kilometres. Build the plane of the future which will be more silent and have half the fuel consumption and CO2 emissions of those of today. Build the low-carbon ships which one day will be used by all the world’s major commercial fleets. Start right now preparing Ariane 6. That’s what we’re going to do.

Also we’ve decided to convene a major industrial conference. We’ve often been asked about the compatibility between the “big loan” and such conferences. So we have decided to set aside €1 billion to be allocated in line with the conference’s conclusions.

Fourth area of action: sustainable development.

Investment of a further €5 billion on top of the €7 billion scheduled every year until 2020 in the framework of the Grenelle Environment Forum.

Our idea is to make a major technological effort.

So we’re going to launch the development of the fourth-generation nuclear reactors (€1 billion) which will recycle uranium and plutonium and produce a lot less waste.

But the bulk of the effort will go to renewable energies since we’re going to allocate €2.5 billion to the ADEME [French Environment and Energy Management Agency], which will then select the best projects presented by the laboratories working on the renewable energies, the French Petroleum Institute, CNRS [National Centre for Scientific Research], universities and CEA [Atomic Energy Centre]. (…)

Digital economy. 4.5 billion.

Our first effort must be to ensure broadband coverage for the whole country. The private sector can’t do this on its own. This being a town and country planning imperative, there has to be a State scheme for creating country-wide fast broadband access. Basically, it means doing for broadband what our country did, a bit late, in the ’70s for the telephone. The government will present the plan in the next few days.

We’re going to make a technological leap forward which is going to revolutionize our way of life. We are going to raise the profile of our cultural heritage, which is barely digitized at all. We are going to set up a major public-private partnership to make use of private-sector technology and efficiency, while keeping control of our heritage. Of the €4.5 billion, we’re going to earmark €750 million for digitizing the contents of our museums, our libraries and our cinema heritage. There’s no question of allowing this heritage to leave. It’s also a matter of identity and particularly national identity. (…)

* * *

As you see, we’ve tried to be coherent. We’ve carried out the university autonomy reform. We’re putting money into the universities. We’re reforming the taxe professionnelle. We’re putting money into industrial sectors. We’re fighting for Copenhagen to be a success and a great ambition. We’re putting money into near-zero emission energies.

The reforms we’re implementing are consistent with the resources we’re putting into them. (…)

You can clearly see our strategy: more investment, lower current spending. I had announced this to the Congrès. (2) All this will form part of a global strategy to restore our public finances.

In this respect, I want to tell you that out of the €35 billion of investment, €13 billion will come from the money reimbursed by the banks. €22 billion will be raised on the markets, on the most favourable terms. (…)

As regards this loan, I want everyone to understand, we’ll have a large proportion of the assets, participating loans (3) reimbursable advances, for example on the plane of the future – these are foundations which will remain, bring in revenue, improve our growth. This loan will fund no current spending, it will finance investment designed to enrich the country.

I’d like to reiterate that with the crisis, public debt has increased in all the developed countries and that our public finances strategy must be absolutely transparent so that everyone understands it. The European Commission is urging us to ensure this. I have no intention of evading it. I’ve done enough to get France to regain her full place in Europe for no one to be surprised by our strategy.

With the crisis, State tax revenues have plunged €54 billion in a year. In a normal year, they increase by €12 billion. So this year we have had €66 billion less compared with a normal tax year. So the crisis has increased our deficits because our tax receipts have fallen. I take responsibility for the strategy of supporting activity, which thank goodness we, like all the G20 countries, have done. I note moreover that I’m now being criticized for the deficits, but those criticizing me are the same people who were saying the government’s economic stimulus plan was too weak, not what it should have been and that we ought to have taken inspiration from what the Americans were doing.

How could one say, eight months ago “the economic stimulus plan is inadequate” and today that the deficit is too big. I’d like someone to explain to me the logic and consistency of that. Our budget deficit is €141 billion; the effects of the crisis came on top of 25 uninterrupted years of increased public spending. In 30 years, our country’s public spending rose from 44% of GDP to 52.3% of national wealth; this has been the constant trend of the past 30 years.

Today we’ve decided to put an end to the trend which has led us to more spending, more taxes and less investment.

In 2007, French public expenditure accounted for 52% of GDP, in Germany it’s 43%. Germany is our main partner and our main competitor: 52.3% in France, 43% in Germany. In 2007, we overtook Sweden as the OECD country with the highest public spending. That’s the situation.

We are also among the countries with the world’s highest compulsory contributions: 42.3% of GDP in 2007. Let me say again clearly: it’s impossible to increase taxes in France. It isn’t a question of ideology, it’s one of competitiveness.

We’re going to have to spend less, spend better. Cutting expenditure can only be the result of a collective ambition, shared by decision-makers in central and local government and the social security system. In January we will be organizing a conference on France’s deficit, bringing together representatives from the State, social security services and associations of local elected representatives. In January, we will meet to agree on how we are going to proceed so we can arrive at a shared diagnosis. Then we will decide before the spring on the consequences and conclusions to draw from it.

At central government level, we have already brought in rules which I won’t go back on. Since my election, 100,000 civil service posts have been abolished in three years, thanks to the non-replacement of one in every two of those retiring. Such an effort is unprecedented, and despite the crisis, State spending, aside from the stimulus measures, is not growing faster than inflation. (…)

But the State accounts for only a third of public expenditure. So we have to look at everything again, with the local authorities, we have to lay down new ground rules together in a spirit of partnership, as has just been done in Germany and Spain. It isn’t normal for a State to slash the number of its civil servants by 35,000 in one year whilst the local authorities create a few more without there having been any transfer of responsibilities at all in the past three years.

As regards the social security system, we won’t let the deficits threaten the survival of our welfare system. I can confirm to you that in 2010 we’ll be embarking on a pensions reform. We can’t act as though longer life expectancy had no impact on our pensions systems. Nothing can justify us financing health care by adding to our debt. So we’re going to continue the job of overhauling our health insurance system. (…)./.

(1) Plan launched on President Sarkozy’s initiative to improve university buildings. 10 campuses "d’excellence", which will be chosen to showcase the attractiveness and influence of French universities.

(2) Joint meeting of the National Assembly and Senate.

(3) A form of equity allowing high-growth SMEs to increase their ability to obtain bank credit without necessarily having to open up their capital or provide substantial security, since it is converted into shares only if the company cannot repay it.