FRANCE'S FOURTH FINANCE MINISTER IN A YEAR:

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 001264 SIPDIS STATE FOR E, EB AND EUR/WE STATE PASS USTR E.O. 12958: DECL: 02/28/2015 TAGS: ECON ETRD EFIN PREL FR SUBJECT: FRANCE'S FOURTH FINANCE MINISTER IN A YEAR: THIERRY BRETON REF: A. PARIS 1230 ¶B. PARIS 1231 Classified By: ECON Minister Counselor Thomas White for reasons 1.5 (b) and (d) SUMMARY -------------- ¶1. (C) France Telecom CEO, Thiery Breton, has been named as new Minister of Finance, Economy and Industry, replacing Herve Gaymard. Breton, an admired and politically astute technocrat and business executive, had been approached to replace Nicolas Sarkozy as Finance Minister in November 2004 but turned down the offer, and the job went to Gaymard. Chirac has now asked Breton to take the job on an emergency basis, following Gaymard,s resignation in the burgeoning scandal over his misrepresentations regarding government payment for a luxury apartment. ¶2. (C) With French unemployment hitting the symbolic 10 percent level, Breton will need all the skills he has learned from reinvigorating sclerotic state-owned companies to manage one of the largest government ministries and to reinvigorate the French economy by generating badly needed economic growth. Breton is a political ally of both President Chirac and PM Raffarin, having served with the latter on the Poitou-Charentes Regional Council during the 1990's. The 50-year-old Breton is experienced in international business circles and speaks excellent English. END SUMMARY. Gaymard Out, Breton In -------------- ¶3. (U) On 25 February, Finance Minister Herve Gaymard turned in his resignation in response to an enveloping housing and benefits scandal (ref A),particularly his misrepresentations about his property holdings and personal wealth amidst controversy over a luxury apartment rented for him by the government. Later that day, France Telecom (FT) CEO Thierry Breton was named by President Chirac to be Gaymard,s successor. ¶4. (C) In a February 1 luncheon with the Ambassador, Breton claimed that he avoided taking the Finance Ministry job earlier in November 2004, when Gaymard succeeded Nicolas Sarkozy, arguing he wanted to complete his three-year recovery plan for France Telecom. However, Chirac clearly felt he was the man for the job this time. This will be France's fourth Finance Minister in less than a year, and Chirac wants to avoid any further scandal in the run-up to the EU Constitution referendum. In Breton he has chosen a capable, ambitious individual who will be sensitive to Elysee wishes but command credibility domestically and internationally. Corporate Background -------------- ¶5. (SBU) Breton is widely seen as a savvy corporate turnaround specialist. In the mid-1990s, he helped improve (temporarily) the balance sheets of computer and software maker Bull. In the late 1990,s, he was credited with saving the French consumer electronics company Thomson Multimedia, which, at the time, Prime Minister Alain Juppe wanted to effectively give away to Daewoo Corporation for a symbolic franc. Breton,s quick turnarounds at Bull, Thomson, mobile phone operator Orange, and finally at France Telecom, were accomplished by sharply reducing costs and increasing revenue. ¶6. (SBU) Breton,s professional experience has been mostly in the French corporate sector. He did a stint at the Ministry of Education, where he served as technical adviser for information technologies between 1986 and 1988. He is a political ally of both President Chirac and PM Raffarin, and served with the latter on the Poitou-Charentes Regional Council during the 1990's. Prior to assuming leadership of France Telecom (FT) in October 2002, he was Chairman of the Board of Directors of Orange, FT,s mobile unit. At FT, he took over what was then regarded as the most indebted telecoms firm in the world. He undertook aggressive steps, selling off non-essential assets, negotiating a deal with the GOF to help pay off the debt, and shedding 7,500 jobs in FT,s domestic operations, after difficult negotiations with the unions. ¶7. (SBU) Prior to his time at Orange/FT, Breton was Chairman and Chief Executive Officer of Thomson (formerly Thomson Multimedia S.A.) from 1997 to September 2002. From 1993 to 1997, he was on the Executive Committee of the Bull Group. From 1990 to March 1993, he served as Director General of CGI, a service development company. From 1981 to 1990 he served as Chief Executive Officer of Forma Systems, an information systems engineering company. Breton has also served on the boards of Thomson SA, Schneider Electric, and Dexia (Belgium) and on the supervisory boards of insurance giant AXA and of Equant NV. Personal Background -------------- ¶8. (SBU) Born in Paris on 15 January 1955, Breton graduated from the Ecole suprieure d,lectricit (Suplec) de Paris and the Institut des Hautes Etudes de Dfense Nationale (IHEDN). Fluent in English, Breton worked as a math teacher at the French Lycee in New York as part of his military service obligations between 1979 and 1981. He has also authored eight science fiction books and several other books on information technology. He has been decorated with the Legion of Honor and, in 2004, was designated as a Commander in the National Order of Merit, both prestigious awards. He is married to Nicole-Valerie Baroin with whom he has three children. Comment -------------- ¶9. (C) As the fourth French Finance Minister in less than a year, Breton, age 50, will need all of his political savvy and management skills. President Chirac will want to chart a cautious course between now and the EU constitutional referendum this summer, but Breton at the same time will be expected to confront persistent unemployment and lagging GOF efforts to improve labor market flexibility; carry out pension and health care reform; reduce the public sector deficit, and stimulate the economy. Unlike his previous turnaround roles, however, Breton is not the CEO of this ship, whose captain has a broader political agenda to protect. Leach