French PM not ruling out taking bank stakes

PARIS (Reuters) - The French government may take direct stakes in banks that have benefited from public bailout packages if they do not open up lending to companies, Prime Minister Francois Fillon said.

"They have to open (lending) up now," he said, according to the transcript of an interview due to be broadcast on Monday night by France 2 Television.

"If we have the feeling that the banks aren't doing the job that is needed, there are two possibilities. The first is, we withdraw the credits we have brought in. That's the contract the government has with the banks," he said.

"Secondly, if we take back this money, the banks will find themselves in difficulty and, therefore, at that moment the question arises of entering into their capital, perhaps changing their managers and controlling their strategy," he said.

The chief executive of Societe Generale said on Monday there was no need for the banks to be nationalized.

But Fillon's comments, coming on the day the European Commission cut its forecast for 2009 French economic growth to zero, reflects concern that banks helped by massive government bailouts may be sitting on cash rather than lending to business.

Paris has so far resisted following the example set by Britain, which has part-nationalized the UK banking sector. On Sunday, Portugal offered 4 billion euros ($5.1 billion) to its banks to help them cope with the financial crisis.

Earlier this month, President Nicolas Sarkozy earmarked 360 billion euros for French financial institutions as part of an international effort to help banks survive the worst financial crisis since the Great Depression almost 80 years ago.

France has also agreed to lend 10.5 billion euros to its top banks to encourage them to lend more money to businesses but ministers have been increasingly frustrated by a feeling that they have not lived up to their side of the bargain.

Sarkozy last week threatened public exposure to institutions that did not assume their responsibilities and said a "moral pact" bound banks helped by the state not to hoard liquidity but to keep up lending.

France agreed to subscribe to subordinated debt issued by Credit Agricole for 3 billion euros, BNP Paribas for 2.55 billion, Societe Generale for 1.7 billion, and for 1.2 billion by Credit Mutuel.

It will also lend 1.1 billion to Caisse d'Epargne and 950 million to Caisse d'Epargne's merger partner, Banque Populaire.

(Editing by David Cowell)