France's Lagarde warns banks not to stop lending

PARIS (Reuters) - French Economy Minister Christine Lagarde repeated on Saturday a warning that banks that have benefited from public bailouts had a responsibility not to cut off lending to companies struggling in the financial crisis.

"I would like to believe that threats will be enough and we won't have to implement them," she told Sunday's edition of the daily Le Parisien newspaper in an interview released ahead of publication.

The remark, which reflects growing concern that banks have not done enough to unblock lending to businesses, follows a speech by President Nicolas Sarkozy on Thursday threatening public exposure to institutions that did not "accept their responsibilities."

Sarkozy said a "moral pact" bound banks helped out by the state not to hoard the liquidity released in public rescue programmes but to keep up lending.

"I hope that the banks, duly alerted by the head of state, will play the game and show they are responsible economic agents," Lagarde said.

The French state has already earmarked over 360 billion euros ($460 billion) to prop up the financial sector as part of a global effort to help banks ride out the worst financial crisis since the Great Depression of the 1930s.

With unemployment rising, consumer morale at rock bottom and growing expectations France will tip into recession in the third quarter of the year, the government fears frozen credit will stifle the economy.

Many companies have complained they still find it hard to obtain vital credit despite the underlying health of their businesses and Lagarde acknowledged even big groups may be having problems.

"The government has concentrated first of all on small and mid-sized firms, whose voice is often heard less clearly than big groups," she said.