French finance minister sees no risk of financial crisis, despite political woes

By Leigh Thomas

PARIS (Reuters) -Finance Minister Eric Lombard said on Thursday he did not see any risk of a financial crisis in France, seeking to reassure investors even as the government faces likely defeat in a confidence vote next month.

French bonds and stocks took a beating on markets earlier this week as Prime Minister Francois Bayrou surprised everyone on Monday by announcing the confidence vote over his plans for sweeping budget cuts.

Bayrou will focus the vote on the need to put the country's finances back on track as he tries to get approval for his budget plans. Lombard himself talked earlier this week of a potential risk of needing the International Monetary Fund to step in if France did not put its finances in order.

However, Lombard adopted a more reassuring tone on Thursday.

"I don't believe in a financial crisis," he told a gathering of France's MEDEF business lobby group. "The country is rich, the country is growing, the country is managed, it is under control, and France's businesses are doing their job," he said.

"We have no difficulty financing our economy," he added, adding that the public deficit would be cut to 5.4% of gross domestic product by the end of the year, as planned.

Opposition parties have said they will bring down the minority government in the September 8 confidence vote.

Business leaders told the same conference on Wednesday that the political crisis carried heavy risks for the economy.

Opinion polls conducted after Bayrou's announcement show most French people now want new national elections, pointing to deepening dissatisfaction with politics and a risk of lasting uncertainty.

(Reporting by Leigh Thomas, Jean-Stephane Brosse, Bertrand Boucey; Writing by Ingrid Melander;Editing by Sudip Kar-Gupta and Frances Kerry)