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EC takes a dig at the dirigistes |
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Wednesday, 21 July 2004 |
21 July, 2004: The French have long been unable to resist state intervention in sectors that should rightfully be ruled by market triggers and signals. Yesterday, The European Commission in Brussels took exception to more flagrant instances of this 'dirigiste' tendency involving illegal state aid to France Télécom.
What's a billion euros between friends? Well, when the 'friends' in question are the French government and the nation's flag carrier, France Télécom (FT), 'a billion euros' adds up to illegal state aid and must therefore be repaid, according to the European Commission (EC). No surprise that the French authorities are set to appeal, so deeply ingrained are their interventionist (dirgiste, in local parlance) instincts.
The specific sum which FT must repay actually relates to special tax concessions enjoyed over almost a decade up to 2002. The total is estimated at between €800mn and €1.1bn, plus interest. By failing to collect revenues due to it, the state was indirectly providing aid to FT, the Commission ruled.
More interesting, perhaps, are the Commission's criticisms of the so-called 'shareholder advance' which Paris offered FT ahead of a vital rights issue at the end of 2002. This was the softest of 'soft loans' and at the time had people searching out their 'Only in France…' files to keep it safe for future reference.
The time for that reference is now, with the EC going beyond the loan itself in blasting the French attitude. In yesterday's statement (for the full text of the Commission's ruling, click here), it said, "the offer of a shareholder's advance should not be seen in isolation but against the backdrop of government statements from July to December 2002. The statements created expectations and confidence on the financial markets and helped maintain France Télécom's investment rating. If the statements had not been made, no reasonable investor would have offered a shareholder's advance in these circumstances and assumed alone a very large financial risk."
Sadly, as if to confirm its 'could do better' reputation when it comes to curbing the excesses of the more powerful Member States, the Commission cannot put a value on what looks like an exercise in market-rigging and "will therefore not order the recovery of this aid."
Although the EC's definition of what constitutes state aid is relatively precise, it clearly feels that it is moving into uncharted territory when the aid in question is less tangible, being concerned with signals to the market which may or may not be distorting in character.
While Brussels goes in search of the money, Paris is certain to appeal the ruling. Something about 'leopards' and 'spots' comes to mind…
Jim Chalmers
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