French loan to bail out auto industry

France will lend $7.7-billion to carmakers Renault and Peugeot-Citroen in exchange for a promise to halt job losses and rein in executive bonuses, reports said today.

President Nicolas Sarkozy was to meet car manufacturers at 4.30 pm (2100 IST) at the Elysee Palace to discuss how to protect their key sector, which employs one French worker in ten, from the global economic storm.

According the dailies Les Echos and Le Figaro, the president was to offer the firms three billion euros each if they agree to stop French plant closures and job cuts and limit shareholder dividends and bonuses.

Last month, Prime Minister Francois Fillon promised carmakers aid of five to six billion euros, and the amount could rise further if the state decides to help Renault Trucks, which is owned by AB Volvo of Sweden.

Sarkozy has made protecting France's iconic industries the central plank of his supply-led plan to ride out the global economic slowdown, but he will have to tread carefully to avoid triggering a row over protectionism.

Last week, he angered Eastern European governments by suggesting in a television interview that Peugeot should close a plant in the Czech Republic and bring production home to France, where many factories are under threat.