Going Global

International Investing: France


Country Overview: France is transitioning from an economy featuring extensive government ownership and intervention to one that relies more on market mechanisms. Many large companies have been partially or fully privatized, with the government relinquishing stakes in such big firms as Air France, France Telecom, and Renault. The government continues to hold major interests in the power, public transport, and defense industries.

The population has remained opposed to labor reforms.

At least 75 million foreign tourists visit France every year, making it the world's most visited country and giving it the world's third-largest tourism income.

The tax burden, nearly 50 percent of GDP in 2005, remains one of the highest in Europe, and unemployment is nearly 9 percent.

What to Watch: With Nicolas Sarkozy in power, has the time come for big French mergers?

The union of Suez with Gaz de France has just been sealed, and Sarkozy's office is already preparing the next deals. Areva, Alstom and Bouygues could be next. Thales and Safran are said also to be on the president’s agenda.

There is nothing surprising about this. Well before he got the top job, Sarkozy expressed his determination to create "national champions."

Officially, this was to adapt French companies to a new global environment, but realistically, it’s about protecting them from foreign hostile bids. Is this the answer to globalization? Or is it old-fashioned French paranoia, whose goal is to block any merger involving a foreign company?

Is Sarkozy acting for the good of these companies, or is he putting national pride before industrial logic? We’ll have to wait and see.

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