Sarkozy details measures for growth, jobs

President Nicolas Sarkozy used a primetime television interview to flesh out a flurry of measures to boost employment and competitiveness which he hopes to rush through France's parliament before a presidential election in April.

Sarkozy, who is running far behind Socialist challenger Francois Hollande in opinion polls for the election, said he would raise the VAT rate to 21.2 percent from 19.6 percent from October to fund a reduction in social charges on companies.

The move, which Sarkozy first alluded to in a New Year's speech, is aimed at narrowing a competitiveness gap with Germany that is weighing on French growth, but it risks angering voters.

Among other measures, Sarkozy said he would set up an industrial investment bank in February with a billion euros in capital that will lend to small and medium-sized businesses struggling to obtain financing in today's climate.

He also said companies with more than 250 employees would be obliged to take on interns to the level of 5 percent of total staff, as a way of helping reduce chronic youth unemployment.

Sarkozy said he had a duty as president to hold off announcing his re-election bid until as late as possible.

Yet his interview, broadcast live across eight TV channels, seemed timed to respond to a series of TV appearances and speeches last week by Hollande, who is campaigning at full throttle for the two-round election on April 22 and May 6.

"We have to protect employment, we have to defend it, value it," said Sarkozy, who has thrown his focus onto growth and jobs since it became clear late last year that his deficit-cutting efforts could not save France from a credit rating downgrade.

"I am convinced this decision will save jobs and that it's the only credible way to stop outsourcing," he said of his so-called "Social VAT" plan to ease firms' social contributions.

Sarkozy, who turned 57 on Saturday, said a financial transaction tax he is planning for August would set a tax of 0.1 percent on transactions in French securities.

He gave no detail on the tax, which France wants to be adopted across the European Union, but a government source later said it would target shares, not bonds, and could raise a billion euros annually.

Separately, Sarkozy announced a rise in taxes on individuals' financial income such as interest and dividends.