France poised to sell off big three

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The Independent Online


The French government is poised to announce a series of large privatisations, to include the aluminium company Pechiney, the electronics group Thomson, and the remaining 51 per cent of Renault, the car maker.

Others in the government's sights are Banque Francaise du Commerce Exterieur, the foreign trade bank, and Compagnie Generale Maritime, the shipping concern.

The formal decree is expected to be published next week and the sell- offs could start as early as September.

Directors at Pechiney and Renault are known to have been pressing for privatisation for some time. Renault returned to a Fr3.36bn (pounds 450m) profit last year despite the relatively slow economic recovery in France. Pechiney, although it made a loss of Fr3.7bn, has been actively restructuring in preparation for privatisation.

The full privatisation of Renault presents particular difficulties, partly because of the militancy of the trade unions and partly because some in the new administration lack confidence in Louis Schweitzer, the Socialist appointee who heads the company - even though he favours privatisation and brought Renault back into profit.

While sending a political signal that President Jacques Chirac intends to honour his campaign pledge to speed denationalisation, the privatisations are badly needed by the French exchequer to help to fund an ambitious job-creation and training programme.

The Prime Minister, Alain Juppe, said last week that revenue from earlier privatisations had been revised sharply downwards. This would cause the projected budget deficit for 1995 to rise by Fr5bn to Fr37bn unless action was taken.

The government's mini-budget, due to go to the National Assembly next week in the form of a draft law on financial adjustment, provides for a 2 per cent increase in the standard rate of VAT to 20.6 per cent, a 6 per cent rise in the price of tobacco, and 10 per cent increases in taxes on wealth and company profits. It also calls for a 4 per cent increase in the minimum wage from 1 July.

Revenue of at least Fr40bn is said to be needed from privatisations if the deficit is to be kept at its planned level of Fr32bn.