Macron has chance to make France a better investor but the task will be complex

Source:Global Times Published: 2017/6/11 19:33:39

The French state is a curious shareholder: too active in some cases, too passive in others, and largely unconcerned about underperforming the broader market. President Emmanuel Macron has the chance to rectify these problems. The question is whether he has the desire.

The ex-banker wants to use some of the Republic's shareholdings to finance a 10 billion euro ($11.2 billion) fund for industry and innovation. That should be no problem: The sprawling portfolio was worth nearly 10 times as much at the end of 2015, and comprised stakes in 1,750 companies in a variety of sectors. Macron could, however, usefully go a lot further.

There are many potential conflicts of interest between what suits the state as a political player, its interest as a shareholder, and the long-term public good. Consider its 83 percent stake in utility EDF. A move to reduce energy tariffs, or extract large dividends, might be politically popular but could hurt the company's profitability and capacity to invest. Or take a pre-election bid to save jobs at Alstom, which prompted the government in October to order high-speed trains that state rail operator SNCF may never be able to run on suitably fast tracks.

The temptation to allow problems to fester or meddle for political reasons is greater when unemployment is at 9.6 percent and voices from both the political far-right and far-left advocate a bigger role for the state. Companies in which the state had a stake employed nearly 2.4 million people, or one in six workers outside the public sector, at the end of 2015.

There may, however, be a price to pay. The APE, an agency housed in the Finance Ministry, manages four-fifths of the government's portfolio in euro terms, and the value of the listed shares it holds fell by 54 percent in like-for-like terms in the decade up to the end of 2016, according to the Court of Auditors. That was more than four times the drop in France's CAC 40 stock index.

Volatile energy and raw materials prices were a factor, and the portfolio has outperformed the national blue-chip index so far this year. But the public auditor reckons past governments share a part of the responsibility.

If Macron's instincts haven't changed, his view on what is in France's strategic interests is likely to involve keeping cutting-edge technology and know-how tethered to the French soil rather than falling into overseas, and particularly non-European, hands. This, rather than a hard and fast definition of the sectors that are vital to France's national interests may determine how the state's portfolio is managed. Macron is a banker by background, but a politician at heart.

The author is Swaha Pattanaik, a Reuters Breakingviews columnist. The article was first published on Reuters Breakingviews.

Posted in: INSIDER'S EYE

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