Chirac Names France Telecom's Breton as New Finance Minister

Feb. 25 (Bloomberg) -- French President Jacques Chirac named France Telecom SA Chief Executive Officer Thierry Breton as his new finance minister following the resignation of Herve Gaymard.

The country's fourth finance minister in a year, Breton, 50, takes charge after Gaymard resigned following what he termed a ``serious error of judgment.'' Gaymard, 44, provoked public disapproval for renting a 600-square-meter (6,500 square-foot) apartment just off the Champs-Elysees in Paris for 14,000 euros ($18,460) a month at taxpayer's expense.

Gaymard's expense bill was revealed at a time when he was calling for the government to rein in spending so it can meet the European Union's deficit limit. The French government has surpassed the limit of 3 percent of gross domestic product for the past three years. Gaymard said on Feb. 8 that unless the government reins in spending ``we're going to hit the wall.''

In picking Breton, the head of the country's third-biggest company by market value, Chirac, bypassed government officials such as Health Minister Philippe Douste-Blazy in favor of an executive who has helped revive France Telecom and, before that, Thomson SA, a consumer-electronics company.

``He's a boss who's appreciated by the opposition, and who's been quite successful at Thomson and France Telecom, where social issues were tough,'' said Bruno Jeanbart, who is director of political studies at polling company CSA in Paris.

Reviving Growth

Breton will be charged with reviving growth in Europe's third-biggest economy and reducing a jobless rate of 10 percent, the highest in four years. French economic growth will slow to 2 percent this year from 2.3 percent in 2004, the Organization for Economic Cooperation and Development predicted Nov. 30. That compares to 3.3 percent the OECD predicted for the U.S.

He will also oversee the sale of government stakes in companies including Areva SA, the world's biggest builder of nuclear-power plants, and Electricite de France, the world's biggest power company. France also plans to sell Societe des Autoroutes du Nord et de l'Est de la France, which runs highways linking Paris with Strasbourg and Calais, to raise about 900 million euros in an initial public offering next month.

Breton will also have to cut national debt of about 1 trillion euros, forecast to reach 65 percent of gross domestic product in 2005.

Wanadoo, Orange

Shares of France Telecom have more than tripled since he took over in 2002. Breton cut debt and returned the company to profitability in 2003 after it lost more than 30 billion euros in the previous two years. He also led the repurchase of stakes in Wanadoo SA, France Telecom's Internet unit, and Orange SA, its mobile-phone business.

The government raised 5.1 billion euros selling almost 11 percent of France Telecom in September, cutting its stake to below 50 percent. The government first sold stock in the company in 1997.

Before moving to France Telecom, Breton was CEO of Thomson from 1997 to 2002, bringing back the maker of RCA TVs from the verge of collapse to profit. He sliced borrowing, brought in partners such as Microsoft Corp. and took the world's No. 4 consumer-electronics company public.

``The drawback of appointing Breton is to have a very determined person who struggles to impose himself upon his administration and who won't speak cautiously enough,'' said Jeanbart.

`Formidable Communicator'

Breton, who earned 1.11 million euros at France Telecom last year, doesn't fit the mold of the typical French official.

The son of a scientist from the Center for Atomic Energy, Breton graduated from the Ecole Superieure d'Electricite, taught math at a French high school in New York at the age of 24, founded his own software company at 26 and at 31 helped create Futuroscope, an open-air science park in the rural region of Poitou-Charentes.

Breton ``is a formidable communicator,'' said Paul Hermelin, chief executive officer of Cap Gemini SA, Europe's largest computer-services company, on television station LCI today.

He has written eight books, the 1984 political thriller ``Softwar,'' about a virus planted by a U.S. government agency in the Soviet Union's computer system.

Breton is also a board member of Thomson, Schneider Electric SA, Dexia SA and Axa SA.

``My philosophy is that, if the president of your country, whoever he is, is asking you to help the country, you have no other option but to say yes,'' Breton said in a Feb. 4 interview.

Gaymard's Exit

Gaymard, who has eight children, vacated his apartment after the satirical and investigative weekly magazine, Le Canard Enchaine, revealed the size and rental cost of his apartment, sparking angry newspaper columns and calls from the opposition Socialist Party for his resignation.

Gaymard broke no laws in choosing his apartment. The government provides housing for ministers in state-owned buildings or in rented Paris apartments.

The Gaymard family had moved into the apartment on Feb. 1, after a month of work to turn two 300-square-meter apartments into a duplex, Liberation daily said. The Canard reported on Feb. 23 that renovations to the apartment had cost the government 150,000 euros.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.

To contact the editor responsible for this story: Catherine Hickley at chickley@bloomberg.net.