Privatization in France Loses Ideological Flavor
The French government intends to permanently turn the page on an industrial policy of nationalization
THE lack of any ideological debate following the new conservative government's announcement last week that 21 major state-controlled companies would be privatized, symbolizes the profound changes in French society over the past decade and confirms that the success of the program will depend on financial rather than political considerations.
The government of Prime Minister Edouard Balladur, which came to power two months ago following the crushing defeat of the Socialist Party in legislative elections, said it would sell companies, including the famous automobile manufacturer Renault, the chemical giant Rhone-Poulenc Inc., and the national airline Air France for an estimated $54 billion.
"It is an ambitious program to build a modern and solid economy," Finance Minister Edmond Alphandery declared.
Although all 21 companies or groups will not be privatized for several years, the government hopes to sell Banque Nationale de Paris, the oil company Elf Aquitaine, the chemical maker Rhone-Poulenc, and the insurance firms Assurances Generales de France and Union des Assurances de Paris before the end of the year for about $7 billion.
While the success of the program is likely to depend on the state of the international economy in the coming months, the project marks a major break with the long-established French tradition of a strong central state playing a leading role in all aspects of the country's political, social, and economic life.
President Francois Mitterrand expressed reservations when the plan was presented to the Council of Ministers last week, but his comments were milder in tone and content than seven years ago, when he virulently opposed the first privatization scheme carried out by the government of Prime Minister Jacques Chirac.
Last week Mr. Mitterrand, whose powers have been greatly reduced by the Socialist defeat, said only that he thought the list of companies to be privatized was a bit long and that groups vital to the country's security should remain in government hands. The president was referring specifically to Aerospatiale, the builder of the Ariane launcher.
For its part, the Socialist Party issued a statement charging that "the government remains prisoner of a dogmatic vision that systematically denies it any role in the economic and financial management of companies."
But while the government's political problems are negligible and its majority in the National Assembly assures easy passage of the new law, Europe's current economic recession and the depressed state of the Paris stock market are certain to make privatization more difficult than it was between 1986 and 1988. At that time, the Chirac government sold 11 groups, including the leading television network TF-1 and the financial companies Suez and Paribas.
Analysts say that given the current crisis in the real estate market, leading French insurers and bankers are no longer willing or able to invest the large amounts of money necessary to become part of the so-called stable core of shareholders. At the same time, individual French investors have largely lost their appetite for buying shares as a result of the stock market crash in 1987 and savings plans that were yielding more than 10 percent until a recent drop in interest rates.
In 1987, France counted 10 million small shareholders, but since then the number has consistently declined to between 4 million and 6 million, according to most estimates. Suez, for instance, has lost 3 million of its original 3.8 million small shareholders at the time of its privatization.
The government is counting on foreign investors to buy significant portions of the companies to be put on the market during the next two to three years. To that end, it has abolished the 20 percent limit imposed in 1986 on the number of shares foreigners may acquire in any one firm.
Nevertheless, the government is not expected to allow foreign interests to control the core of shareholders that will insure the stability of the newly privatized firms. The core group will be chosen by an independent commission.
The conservative government has also decided to hold a golden share, allowing it to limit the participation that any one group or individual, foreign or French, may have in a privatized company. The finance ministry also will have to expressly authorize the acquisition of more than 5 percent in enterprises in the key sectors of health, national security, and defense.
In deciding on such a vast program of privatization, the government intends to permanently turn the page on an industrial policy of nationalization that began with the Popular Front in the 1930s, continued with DeGaulle after World War II, and culminated with Mitterand in 1982.