Sarkozy `Marshall Plan' for Suburbs Takes Backseat in Crisis

By Helene Fouquet

Nov. 4 (Bloomberg) -- Mohammed El Rhazi, a worker at mattress-maker Dunlopillo, calls the credit crisis the ``new plague'' in his impoverished Paris suburb of Mantes-la-Jolie, after riots tore through there in 2005.

``French suburbs are hit by this global crisis like everyone else,'' said the 43-year-old father of four, whose company is under court protection since its parent faced a cash shortage. ``The difference is that our suburbs carry scars. The crisis comes on top of an open wound.''

Three years ago this month, young people in poor French neighborhoods rioted for 21 days, burning cars and destroying property. The violence in those areas -- with large immigrant populations packed into concrete high-rise buildings and youth unemployment of about 40 percent -- prompted President Nicolas Sarkozy to create a plan to revive the suburbs, known as ``banlieues'' in French.

Now, as his government focuses on containing a banking crisis and countering a possible recession, the plan is taking a backseat. Without what Sarkozy once called a suburban ``Marshall Plan'' -- similar in spirit to the effort that rebuilt Europe after World War II -- the financial turmoil will hit these areas the hardest and may make an already fragile situation worse, social analysts and businessmen said.

``People from the wealthy Neuilly suburb are less likely than the ones in Mantes or Clichy to lose jobs,'' said Aziz Senni, 31, who created ATA SA, a minicab company in Mantes, and heads a group trying to help boost employment. ``Suburban workers live on construction, small services and temporary jobs, and these are the first ones to go.''

Auto-Plant Layoffs

PSA Peugeot Citroen, Europe's second-biggest carmaker, cut 700 temporary jobs at its Poissy plant in September. Many of the now-unemployed workers live 30 kilometers (19 miles) from there, in Mantes. Renault SA's Flins factory, which produces the Clio 3 car, said it may soon lay off assembly-line workers, most bussed in daily from Mantes and Les Mureaux, another suburb.

Signs of frustration are already evident. Luc Besson's movie-production company, Europacorp SA, was forced last month to cancel filming of ``From Paris With Love,'' starring John Travolta, in the Paris suburb of Montfermeil after youths torched its cars and threatened the crew.

``It really saddens me,'' Besson, the director of such films as ``The Big Blue,'' told Le Parisien. ``We created 200 jobs. The problem always comes with the 201st person, who says `Why my brother, my cousin? And I, I get nothing?'''

November Rampage

Such hostility has largely been contained. Still, rioters in Villiers-le-Bel, north of Paris, went on a rampage in November for a few nights, this time with guns. Things are ``much more violent than in 2005,'' Patrick Ribeiro, head of the Synergie Officiers police union, said at the time. ``The youths are shooting at us with handguns and hunting rifles.''

The 2005 clashes started after two boys in the Paris suburb of Clichy-sous-Bois were electrocuted in a power substation where they were hiding from the police. About 10,000 cars were burned across France and damages reached 200 million euros ($255 million).

In the three years since then, ``nothing was really done to help the suburbs become strong enough to face the kind of tsunami arriving now,'' Senni said.

`National Priority'

When Sarkozy, who was elected president in May 2007, presented his ``Suburb Hope'' plan in February, he called it a ``national priority'' that would ``break intellectual, cultural, social and psychological ghettoes,'' earmarking 1 billion euros for the program.

Forty-eight companies -- including road builder Eiffage SA; Areva SA, the world's biggest builder of nuclear reactors; and Total SA, France's biggest oil company -- pledged to create 40,000 jobs by 2010. About 11,800 have been generated so far.

Now, ``the target does not seem very realistic,'' said Laurence Boone, an economist at Barclays Capital in Paris. ``This plan needs to be revised. If a company has no business in the near future, like in this crisis, why would it hire, even if it's a state-subsidized job?''

The pessimism comes after the national statistics institute said last month that France slipped into a recession in the third quarter, the first in more than 15 years. The number of job seekers rose by 42,000 in August, the most since at least 1993. The International Monetary Fund says France's economy will grow 0.2 percent in 2009.

Urgent Attention

The government has set aside 360 billion euros to boost the capital of French banks and help them step up lending. While it tries to rekindle the economy, it is underplaying concerns that suburban projects may need immediate, urgent attention.

``The tensions in the projects have existed for 30 years,'' Fadela Amara, the secretary of state for urban affairs in charge of the projects plan, told reporters Oct. 29. ``It's not in 48 hours that you are going to solve the problems.''

For Dunlopillo's El Rhazi, the financial turmoil dashes any hope conditions in his neighborhood will improve soon.

``Project or no project, this crisis is bad news for all of us,'' he said. ``More jobless people, more impoverished families will just make things here more unpredictable.''

To contact the reporter on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net