Bottom Line: Nothing to crow about as Alstom heads for a GE deal

 
Marc Sidwell
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THE FRENCH rooster is already crowing over the deal clinched with GE for Alstom’s energy businesses this weekend. I wish it well. But the socialists in the Elysee Palace should probably limit the liberality with which they spray their champagne. While for some this proves French politicians can cut a smart deal with major multinationals, businesses will read another lesson.

It’s true that after a protracted period of wrangling GE has ended up revising the terms of its original deal into something much less like a purchase and more what the politicians prefer to call an alliance. GE will sell some signalling assets to Alstom and enter collaboration pacts in the US. Crucially the French government is set to buy Bouygues’ 20 per cent stake in the nuclear turbine manufacturer and to hold a golden share giving it veto rights over strategy for the nuclear joint venture. GE must create at least 1,000 new jobs or it will face fines.

But that means the French state took a privately-held company and inserted as much government control as it could manage.

Worse, in the battle between warring bids, the politicians behaved as if Alstom was already an asset of the state. In May, a new decree made any deal in the energy, water, transport, telecoms and health sectors dependent on the whim of the economy minister, a decree fated to do lasting damage.

Such behaviour puts the recent political circus in the UK where MPs sought to interfere with Pfizer’s bid for Astrazeneca in the shade.

When government gains ground by limiting the manoeuvre of private firms, it does so at a cost to its own economy. France should weigh the political benefit of casting suspicion on big business against the long run price of such populism. Francois Hollande needs to reread The Seen and the Unseen, the timeless essay by his nineteenth-century countryman Frederic Bastiat.

Let’s hope this isn’t the start of a trend. The protectionist road the French have pursued follows May’s devastating election results, which saw Marine Le Pen’s Front National take a quarter of the national vote. The success of extreme nationalists across the continent should be met by efforts to restart Europe’s faltering economies: by cutting the burden of state control and improving the labour market’s flexibility. Instead, the Alstom deal demonstrates how to grab more power for the centre while catering to petty nationalism. It’s an ugly combination.

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