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French economic nationalism is as old as the mimolette. The hard cow’s milk variety was invented at the request of Jean-Baptiste Colbert, Minister of Finance under Louis XIV, at the end of the 17th century to compete with the Edam sold by the Dutch enemy.
It is therefore easy to ignore the recent decision of the French government to block the takeover of France’s largest supermarket by a Canadian retailer as faithful to a long tradition. But this last Colbertist intervention for “food security” reasons is all the same remarkable. Rather than demonstrating the state’s willingness to protect France’s economic sovereignty, it may simply show the void of promise.
The veto against Couche-Tard’s € 16.2 billion offer for Carrefour was an obviously political act. Barely two days after the publication of the details of the discussions, they were killed by Bruno Le Maire. The French Minister of Finance issued a “no courteous but clear and definitive” during a superficial meeting with Alain Bouchard, the Quebec boss of Couche-Tard, who flew to Paris overnight. The minister had the formal powers to block the merger under French rules on foreign takeovers – the food industry is classified as strategically important – but he didn’t need to use them. The deal was dead.
No serious attempt has been made to assess the Canadian group’s € 3 billion investment plan for Carrefour, a pioneer in the hypermarket. The French wouldn’t understand if the aisles were empty of rice or pasta, Le Maire said, without explaining why that would be more likely under Canadian compared to its current owners.
The government feared a backlash if it had allowed Carrefour, the country’s largest private sector employer with 100,000 employees and a major buyer of French agricultural products, to fall into foreign hands. The coronavirus pandemic has amplified a feeling of omnipresent insecurity in France and a desire for the country to be more autonomous and led by a more protective state, explains Emmanuel Combe, professor of economics at the SKEMA business school. With a presidential election in just over a year, the government wanted to send the message that it would defend the French against foreign capitalism.
“It’s politically fair but economically wrong,” says Combe.
The veto was applauded across the political spectrum. President Emmanuel Macron congratulated his minister for making “the right decision at the right time”.
Macron’s change of tone astonished his political opponents. The former investment banker went to great lengths to woo foreign investors, refusing, at considerable cost, to reinstate a wealth tax he had abolished when he took office. As presidential adviser, then Minister of the Economy and now head of state, Macron supported the sale of French companies to foreigners, such as Alstom’s electrical activity to GE. He wanted to privatize Aéroports de Paris.
The veto of the Le Maire supermarket gives the illusion of sovereignty. If Couche-Tard had been an EU company, the government would have had no reason to intervene. Combe points out that the French competition authority, of which he is vice-president, recently authorized the takeover by Lidl from Germany of several hundred stores belonging to a low-cost French rival. There was hardly any political ripple.
The ministerial veto does not make an industrial policy. France’s shortcomings have recently been exposed by the inability of its scientific and industrial base to produce Covid-19 vaccines in a timely manner or to provide its own manufacturing facilities to ensure an adequate supply of those purchased through the EU. The prestigious French Institut Pasteur has abandoned its project while that of Sanofi has been delayed. Valneva, a Franco-Austrian biotech, will manufacture its vaccine in Scotland.
After blocking a friendly foreign takeover, Le Maire now opposes a hostile national takeover. The French government is said to have supported an amicable rapprochement between Veolia and Suez to create a national champion for waste and water. But the candidacy of Veolia becoming hostile, it is no longer to its liking. “French capitalism cannot be a war of all against all,” he said. He called on the market regulator to intervene.
During the financial crisis, then President Nicolas Sarkozy undertook to “moralize” capitalism. His successors want to politicize it. In a recently published book, Le Maire says that with the pandemic “politics must take over the economy”. What exactly this means in practice remains a mystery. But if it deters foreign capital, expertise and technology, it will prove costly.
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