Nationalization throws Paris financial circles for loop
Much of France's financial community is still uneasy a week after Prime Minister Pierre Mauroy outlined his administration's plans to reshape France's economy.Skip to next paragraph
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The most startling aspect of Mr. Mauroy's 75-page speech to the National Assembly is that it shows that the Socialists seem intent on doing exactly what they promised to do during their election campaign -- including nationalizing 11 major French industrial groups and France's remaining 253 privately owned banks.
French businessman were hoping that the Socialists had only been engaging in election rhetoric and would modify their position once they got into power.
The reaction to Mr. Mauroy's annoucement of his government's intentions was swift.The franc promptly sank to its lowest level in recent memory (hitting a low of 5.87 francs to the dollar, compared to an average of 4.4 francs to the dollar last year).
Fracois Ceyrac, president of the Conseil National du Patronat Francais, which represents French business leaders, termed the Socialist plan "an economic absurdity."
"We are unable to see any coherence in some of the decisions that are being taken," said Mr. Ceyrac, "on the other hand, concerning nationalizations, we do have a more precise idea of what is intended, and that's precisely what feeds our uneasiness."
The nationalizations, which will be voted on when the National Assembly meets in the fall, will rise the direct government-controlled portion of France's gross national product from 12 percent to about 16 to 17 percent. It will also bring an estimated 820,000 French under government control.
Most of France's privately owned banks, which eurrently employ about 100,000 people, will be taken over by the government by year's end. As many as 50 small provincial banks may be allowed to remain independent, and foreign owned banks will not be nationalized; but credit will be brought completely under government control.
Mr. Mauroy explains that the banks are being nationalized to guarantee that small- and medium-sized industries can obtain credit. Few financial experts accept that, however. They suggest the real reason appears to be a government plan to establish a monopoly over crdit in order to force private corporations to go along with reforms. France's three largest banks. Credit Lyonnais, Societe Generale, and Banque Nationale de Paris, were nationalized long ago, but the private banks continued to provide an alternate means of getting loans if a business needed them.
The Dassault aircraft company, which manufactures France's Mirage jets, and the weapons-producing division of Matra, will also be nationalized almost immediately, along with France's two major private steel producers, Usinor and Sacilor. The steel companies are already almost totally owned by the government which bailed them out when they faced financial collapse several years ago.
When Dassault's nationalization was announced, Marcel Dassault, the company's founder, broke into a broad grin and said: "Now I can go on my vacation." The company, which employs 17,500 workers, is already 20 percent government-owned and depends on the government for most of its contracts. Mr. Dassault says he has been ready to sell for a long time. Mr. Mauroy explained that Dassault and Matra's arms divisions were being nationalized because weapon sales should be under government supervision.
Five French industrial groups -- Compagnie Generale de l'Electricite, Pechiney, Rhone-Poulenc, Saint-Gobain, and Thomson-Brandt -- are slated for slower-paced nationalizations, and probably won't be taken over for at least 18 months.
Three partially foreign-owned multinationals -- Cii- Honeywell Bull, ITT-France, and Roussel-Uclaf -- are not expected to be nationalized before 1983 .
In arguing for nationalization, the Socialists point out Renault as an example of a nationalized company that works better than many of its privately owned competitors.
Renault is the sixth largest automaker in the world, and France's largest exporter. But critics caution that the comparison can be misleading. Renault was nationalized without compensation in 1945 as punishment for having manufactured trucks for the Nazi Army during World War II. Taking it would have cost the government nothing.
In contrast, nationalizing the industrial groups and banks will demand a fortune to pay off private shareholders, since, with the exception of the steel companies, most of the groups are foing well. Critics charge that the government will be squandering its resources without getting any benefit in return.
Moreover, Renault has functioned well partly because the government has left it alone. An industrial group without Renault's clout might not get kind of liberty.
With that kind of uncertainty on the horizon. France's new Socialist government is going t o have some formidable obstacles to overcome.