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
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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
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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
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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