We Are All French National Champions Now

The French are famed for government poking its nose in nearly every aspect of economic life; dirigisme, they call it. France's current status as the rotating head of the EU at a time of international turmoil seems to have awakened two of the country's recurrent ambitions (let's set aside those of DSK for the moment): the creation of "national champions" to export a French brand of business and to further its interests in global economic governance. Let us go through some of these efforts, though keep in mind that some seem far-fetched:

(1) The troika of Sarkozy, Bush, and EC President Jose Manuel Barroso have proposed a series of meetings to fashion a revised global financial order. These fellows met at Camp David recently to set the groundwork for this effort. Together with Barroso, Sarkozy is pressing an agenda that may test the limits of American willingness to abrogate what's left of the neoliberal order. From Bloomberg:

Sarkozy and Barraso are pressing Bush for a G8 agenda that includes stiffer regulation and supervision for cross-border banks, a global ``early warning'' system and an overhaul of the International Monetary Fund. Talks may also encompass tougher regulations on hedge funds, new rules for credit-rating companies, limits on executive pay and changing the treatment of tax havens such as the Cayman Islands and Monaco.

(2) Eariler on, I mentioned that European carmakers were petitioning EU countries to see them through these times of trouble via concessional loans and the like. To no one's surprise, France (and to a lesser extent Germany) have been the quickest to respond with pledges of support:

German and French carmakers, which have asked the European Commission for €40bn ($53bn) in cheap loans, are eligible to tap their governments’ banking rescue plans, according to government officials. Both the German and French finance ministries said on Monday that the financing arms of carmakers could use the state guarantees for new lending of up to €400bn and €320bn respectively.

“Car banks can definitely participate in the scheme,” said the German ministry. A French official said: “If you are a bank specialised in providing credit for the purchase of cars you need access to the wholesale markets like any other bank.”

The financing arms account for more than 15 per cent of operating profits at the European carmakers, according to analysts at Morgan Stanley, and car manufacturers have a large short-term refinancing need because of the credit they offer their customers.

(3) I suppose it's nothing special as almost every other OECD country has done so, but the French are also providing capital to (naturellement) their largest banks:

The shares of France’s main banks soared on Tuesday after the government said it would inject €10.5bn ($14bn) into the six largest players in an effort to shore up their balance sheets and ensure they continued to provide credit to consumers and businesses. The move was indispensable if banks were to be “in a position to properly finance the economy”, said Christine Lagarde, finance minister, on Monday night.

Until then, France’s banks had given no indication they were interested in acessing a €40bn recapitalisation fund unveiled by the government last week. But Ms Lagarde said Crédit Agricole would receive €3bn, BNP Paribas €2.55bn, Société Générale €1.7bn, Crédit Mutuel €1.2bn, Caisse d’Epargne €1.1bn, and Banque Populaire €0.95bn...

The capital will come in the form of subordinated loans that are repayable after other debts have been met, do not dilute existing shareholders and do not require a change in dividend policy. Nevertheless, subordinated debt can nonetheless be used to increase the banks’ tier one capital ratios, a main measure of balance sheet strength. The loans will be provided at base rate plus 400 basis points...

The Bank of France, which also acts as the country’s banking regulator, is expected to raise from 25 per cent to 35 per cent the proportion of tier one capital than can be a hybrid of equity and debt instruments. Officials in Paris insisted the state was providing the loans not because the banks in question were in difficulty but because the government wanted to ensure that they were able to continue to provide credit for households and companies.

(4) And last but not least is--I kid you not--Sarkozy proposing that France set up its own sovereign wealth fund (SWF)! Is it just me or does France not even run a current account surplus that would enable it to build up the reserves its putative SWF would draw from? Neither blessed with abundant natural resources nor windfall-generating export industries, it is beyond me where France will get funding. France hasn't run a current account surplus since 2004, and those that it did run before were hardly in the Gulf oiler/Asian exporter league.

Speaking of dirigisme, things get even more jingoistic. Sarkozy suggests shares in European companies should be bought at cut-prices to ensure that their ownership doesn't fall into the hands of...those dratted furriners. It has always boggled me how France wants to punch above its weight in international diplomacy yet adopts a beggar-thy-neighbor attitude at heart. From agricultural subsidies to yoghurt protectionism--you name it. Perhaps it's better to just get used to this sort of thing as the global credit crunch worsens. "We are all French national champions now." From the Associated Press:

French President Nicolas Sarkozy suggested Tuesday that European nations should set up their own sovereign wealth funds to prevent European companies falling into foreign hands as share prices plummet.

"I don't want European citizens to wake up in several months and find European companies belonging to non-European capital, which bought at the share price's lowest point," he told the European Parliament.

"All of us here should think about the opportunity to set up sovereign wealth funds in each of our countries," Sarkozy added. "And maybe these national sovereign wealth funds could eventually coordinate to form a business response to the crisis."

Sarkozy is suggesting that state funds act as political investors to head off foreign purchases of European companies — the latest sign of governments are considering greater state intervention in the face of the current financial crisis.

UPDATE: Unsurprisingly, the WSJ op-ed section takes a dim view of Sarkozy's proposal, calling it a "sovereign wealth dud."