View from City Road: Privatisation a la francaise

Privatisation a la francaise is not quite the robust process recognisable by level-headed Anglo-Saxons. Yesterday Edmond Alphandery, economics minister, confirmed what has been widely leaked in the French press for several weeks. The French government will inject fresh capital into Credit Lyonnais, the uncannily accident-prone, state-owned bank, and restructure the business by shifting dud real estate assets into a shell company.

All may be revealed along with Credit Lyonnais's 1993 results, out tomorrow, which are likely to show hefty losses after a leap in provisions for bad loans.

Rapid expansion of the bank's loan book under ex-chairman Jean- Yves Harberer led it into all the accident black spot borrowers of recent times, including Olympia & York, MGM studios and Sasea, the bankrupt Swiss financial group.

The fashionable intelligence is that the government will inject Fr4bn ( pounds 470m), while between Fr30m and Fr40m of real estate loans will be put into a new shell company.

Clearly French privatisation, which brought in Fr50bn in 1993 and will bring in much more in 1994, is emerging as a means of raising funds partly to prop up ailing state-owned companies like Air France, which is asking for Fr20bn of help, and Credit Lyonnais prior to their eventual privatisation.

This is rational enough since neither company, as currently structured, is remotely acceptable to private investors. But nothing will infuriate non-state owned competitors - including many in the City - more, particularly as the French taxpayer seems set to pay for necessary restructuring before privatisation.

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