Economic dispatch Staying afloat on state life raft
The French government's aid to a beleaguered engineering company has Brussels concerned, says David Gow Monday August 11, 2003 The Guardian Alstom, the French engineering group desperately trying to stay afloat, highlights the dilemma facing European governments when companies employing thousands of people or occupying a strategic role threaten to go under. In France, where a centre-right government is working frantically to introduce market reforms, including large-scale privatisations to meet a budget deficit that will bust the Maastricht rules, the state stepped in. Thirty thousand jobs were enough to persuade it to take almost a one-third stake in Alstom, undermining its core economic philosophy. In Britain, where Alstom employs 10,000, the government stood off as the group announced plans to close its train-making facility at Washwood Heath, near Birmingham, with the loss of up to 1,400 jobs - and said that it would effectively halve its British workforce. An entire set of new trains for the London tube's Victoria line is, instead, to be made in France or Spain. This has provoked outrage among trade unions and, at the very least, deep-seated concern among British industrialists. The Trades Union Congress and Confederation of British Industry are joining forces to press the government to re-think its manufacturing strategy. For, not only has Alstom UK underlined again the ease with which multinational groups can dismiss staff in Britain, it has also shown that the government's liberal economic policy - enabling foreign groups to buy up large swathes of manufacturing and then closing them when the going gets rough - is inadequate to protect strategic industries. Yesterday, the European commission said that the government of Jean-Louis Raffarin had not yet formally notified it of its plans to save Alstom from the knacker's yard - and the company is already receiving state aid under the terms of the emergency refinancing package announced last week. Another case has highlighted the vagaries of state aid. Almost a year ago, the UK government was forced to step in and set the pace on a bail-out for British Energy, the privately-owned nuclear operator that provides more than a fifth of UK energy. We now know via leaked papers from Brussels that the scale of the state aid, much of it hidden from the public, is between £4bn and £5bn. The UK government at least met the EU's strict timetable for giving the aid and submitting the required restructuring plan to Brussels for approval by the competition authorities - before paying the aid. And now an 18-month investigation is under way. France, which faces the same kind of investigation, has already paid out some of the aid and has yet to bother to fully notify the EU. We do not know why the UK government effectively let Alstom take its own commercial decision to semi-quit Britain - and it remains highly contentious why it committed so much public money to keep British Energy going. In a preliminary analysis, Brussels already has ruled that key elements of the British state aid are unlawful - and France, which normally escapes scot-free, may yet face a similar challenge over Alstom. Both these cases have illustrated a sharp contradiction at the heart of the EU's single market: the disruption to normal liberal policies caused by the perceived need to protect "national champions" or strategic industries from competition. Theoretically, state aid should be gradually run down: in practice, it is applied when political imperatives dictate it should be. · David Gow is the Guardian's industrial editor Email [EMAIL PROTECTED]
