By IPS Correspondents
PARIS, Sep 14 2007 (IPS)

Following nearly two years of squabbling, this month France’s national gas utility, Gaz de France, finally agreed to team up with the Franco-Belgian utility Suez, to create an energy behemoth with some 72 billion euros in revenue.

An impressive union, indeed, but some Eurozone observers find the insight the merger gives into the economic policies of French President Nicolas Sarkozy to be the deal’s most interesting storyline.

While some 80 percent of Gaz de France is currently owned by the French state, the government’s share will be reduced to around 35 percent in the new, as-yet-unnamed entity, whose creation follows the scuttling of a potential bid for Gaz de France by Italy’s Enel SpA power.

Having come to office in elections this past spring boasting of his free-market credentials, the Sarkozy government now appears willing to prescribe a vigorous dose of protectionism to ward off the purchase of one of France’s industrial jewels by a foreign-controlled concern.

In addition to the Gaz de France-Suez deal, in recent months, the Sarkozy government has also made plain that it is seeking a politically appetising avenue by which to jettison the German engineering firm Siemens from its joint enterprise with France’s nuclear group, Areva.

Though Siemens currently owns a 34 percent stake in Framatome, the sector of Areva charged with the construction of nuclear reactors, its option on the joint venture – commenced in 2001 – runs out in 2011. The Sarkozy administration appears intent on exercising an option to buy out that stake to create an all-Gallic energy giant, with the French energy group Alstom and its national collaborator Bouygues, an infrastructure company, stepping into Siemens’ shoes.

The move echoes actions taken during Sarkozy’s stint as minister of finance in the government of then-French president Jacques Chirac in 2004, when his office successfully scuttled a move by Siemens to buy stake in Alstom itself, a company that has struggled financially in recent years.

Some analysts see Sarkozy’s actions as indicative of a particularly French approach to national industries in the ever-more-blended economic landscape of the 27-member European Union (EU).

“I would say that France is a very specific case, it’s very different in relation to the European landscape,” says Roberta Bigliani the European research director for the advisory and consulting firm Energy Insights, based in Milan, Italy. “I think that more than any other country in Europe, it’s interested in maintaining controls of critical industries.”

The moves come amidst other Sarkozy initiatives on the national and international stage which suggest that French economic policy under the country’s new administration will be a curious mixture of free-market largess and government control.

In July, Sarkozy successfully lobbied a European Union meeting in Brussels for the removal of the words “free and undistorted competition” from a list of the body’s core objectives for the coming years, and then promptly announced an 11 billion euro stimulus package for France’s lukewarm economy that all but blew out of the water any chance of balancing France’s budget.

Many charge that the French are being hypocritical, forbidding foreign ownership of their own industries while only too happy to take over companies in other EU countries. Only in May, the holding companies of Suez’s main shareholder and deputy chairman Albert Frere – the Compagnie Nationale a Portefeuille (CNP) and Groupe Bruxelles Lambert SA (GBL) – consumed 5 percent of the capital of Spain’s Iberdrola SA., a private electric utilities firm which services over nine million customers in its native Spain.

“I think what we’ve seen over the last few years is that the French are very willing to acquire companies in neighboring European Union member states but that it’s a different story when the shoe is on the other foot,” says Damien Cox, a senior energy analyst with the British firm John Hall Associates Limited.

Cox characterises the French government’s recent moves as “a bout of economic nationalism.”

With tensions rising, it seems probable that the Sarkozy government will be drawn into public debate over some of its activity in the cross-border M&A sector, most likely in the person of Neelie Kroes, the European commissioner for competition policy.

Kroes has been very vocal regarding the EU’s desire to scuttle national monopolies and ant-competitive practices in the Eurozone energy sector.

“Protectionism is not the answer,” Kroes said when she delivered an address to government officials and business leaders in Paris at the end of June. “Protectionism almost inevitably leads to a downward spiral of retaliation. In the long run, we are all worse off.”

Article 81 of the Maastricht Treaty, which helped establish the EU, refers explicitly to the prohibition of practices which “limit or control production, markets, technical development, or investment.”

In recent months the competition office of the European Commission, which serves as the executive body of the European Union, has commenced proceedings against Suez, and fined the Spanish telephone giant Telefónica over 151 million euros for what it characterised as unfair pricing driven by its “dominant position in the Spanish broadband market.”

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