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Sarkozy announces rescue package for French property industry

President Nicolas Sarkozy said he planned to introduce interest-free loans to finance energy-saving improvements to homes and that the government would buy up to 30,000 new homes to support the construction industry.

Sarkozy said that the government would also raise the threshold of income that would allow home-buyers to qualify for state guarantees for their mortgages. The aim is to have 60% of people taking out mortgages eligible for the guarantees compared with 30% currently.

'This will avoid excluding households with modest income from the property ladder,' he said.

However, Sarkozy warned that house prices must become 'attractive' for the real-estate market to recover and that a situation where property prices have soared well above pay levels is unsustainable.

'A sector in which prices have doubled in 10 years is a sector that was preparing a crisis for itself,' Sarkozy said. 'When there's a total disconnection between the evolution of buyers' revenues and property prices, we were preparing for ourselves a latent crisis,' he added.

Part of the plan means that from 2009 France will offer homeowners zero-interest loans of up to €30,000, a measure that will help the construction sector, while boosting energy efficiency.

The part of the rescue package to buy up to 30,000 new homes is aimed at the construction sector to keep people at work. Sarkozy said it not intended to sustain high real-estate prices in France and he stressed that the government would only buy at reasonable prices.

The president also said that he supports broader home ownership in France. The full details of the rescue package will be announced on December 4.