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Western EuropeJuly 1 2007

par excellence

It is high time France was given some credit for operating an economy that is more open than most to foreign companies.
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Among enduring myths is the one that France is a nationalist fortress that keeps all foreign competition at bay and is the last remaining developed country still stuck on state intervention rather than free markets as the preferred economic model.

Little known facts: there is a higher level of ownership of top French companies than of either US or UK large companies (see article page 32). The country’s takeover rules gives it one of the most open legal frameworks in continental Europe. Foreign banks are now regularly present in French M&A battles and in the recent hostile takeover of French steel company Arcelor by Mittal, the foreign company was represented by none other than leading French bank Société Générale.

The French government is not, of course, without its inconsistencies and its continued obstruction to overdue reform of the EU’s common agricultural policy defies logic and earns it negative headlines in the world’s press. But when it comes to agriculture is its stance any worse than, say, that of the US on its farm subsidies?

There are also issues over state-owned companies such as Gaz de France, Electricite de France and nuclear power giant Areva, and the new government of Nicholas Sarkozy needs to make their future clear. There is the challenging situation of Airbus and its business problems to be addressed. The French government owns 15% of Airbus parent EADS.

Analysts are reserved about the Sarkozy impact. While he talks the talk of the free market, his own record is rather mixed. In 2003 as minister of the interior, Mr Sarkozy was in charge of rescuing engineering firm Alstom after the EU blocked the French government’s original plan, saying it amounted to illegal state aid. In the end, banks and the government purchased Alstom’s debt rather than become shareholders, hence its fortunes were not entirely left to the mercy of the market.

System shake-up

So no-one is assuming a hands-off policy as regards major French companies but on shaking up France’s moribund labour market more radical moves are expected.

Whether we get free market policies or limited intervention from the Sarkozy administration, the overall outcome is unlikely to dent the major trend in France towards free-market capitalism. The media needs to catch up with the facts.

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