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With 90 billion euros of participation in companies, the shareholder state has a significant power in France. Too important ? Tribune.

If two characteristics were to be chosen which truly distinguished the French economy from other Western countries, we would cite the very high level of public expenditure and the presence of the State in the capital of many enterprises in the competitive sector. These two combined features make that France is far from a liberal economy.

French public spending

When public spending is about 57% of GDP, 13 percentage points more than the Germany - our main partner in Europe - and that percentage has been increasing for 35 years at least, we measure the degree of socialization Of our economy. Why not after all if this is the choice of the French?

It should be remembered, however, that former President Giscard d'Estaing estimated that, beyond the threshold of 40%, there was a change in the "socialist society". It was a long time ago. Although it is not formally demonstrated that such a level of public expenditure is a handicap for our economy, one can nevertheless think that this peculiarity weighs on its dynamism and its competitiveness insofar as all these expenses are not always justified or bear growth, as it regularly stresses the Court of Auditors .

Even President Hollande in his press conference at the time of the vows for 2014 denounced a state "too heavy, too slow, too expensive" and committed to a plan of savings of 50 billion euros. Nevertheless, the Court of Auditors doubted as early as 2015 the realization of this plan of economy. Its president, Didier Migaud , stated: "We do not see a lot of spending cuts of measures taken in 2015 and that will have effect in 2016 and 2017. In contrast, we see a lot of spending increases that will affect the Years. Thus goes public expenditure in France.

The weight of the state

The second characteristic of our economy is the weight of the state on the decisions of industrial and commercial enterprises. This pressure is exerted notably through its shareholdings in the capital of many companies in the competitive sector.

The armed arm of these interventions is the State Participation Agency (APE), created in 2004, and placed under the supervision of the Minister of the Economy and Finance. As stated on its website : "The agency of state holdings embodies the State shareholder, investor in the equity deemed strategic by the state companies to stabilize their capital or support them in their development or Their transformation. "

More specifically, Article 2 of the decree establishing the EPA stipulates that 'the Agency shall, in liaison with the ministries concerned, examine the main investment and financing programs of undertakings and Acquisition or sale, commercial agreement or cooperation and research and development. It proposes to the Minister for the Economy the position of the State shareholder on these matters and implements it. "

"Strategic" holdings?

This is the wide scope of its mission in the companies that benefit from its support. There are many entities within the scope of the EPA (there are 81 in 2015) and varied. For some, it is permissible to question their "strategic" character.

The portfolio of state holdings. © DR Agency of State shareholdings.

It must be said that this characteristic is sufficiently elastic to allow any tricolor company to be classified as strategic whenever reference is made to economic patriotism. To this must be added their subsidiaries and shareholdings in companies with a government holding at least 1% of the capital. Entities included in the scope of the APE include, to name but the most emblematic: Paris Airport, Casino d'Aix-les-Bains, Charbonnage de France, CNP-Assurances, France Televisions, GDF-Suez, La Française des jeux, La Poste, Orange, Renault, Safran, SNCF, SNPE, Thales.

As the EPA acknowledges, on its website, "the portfolio held directly or indirectly by the State is at the same time wide and very diverse, both with regard to the sectors of activity concerned and the weight of the State Within existing companies or legal forms. "

One wonders whether this portfolio is a true investor strategy or the chance of history. Between the ideological motives linked to the nationalizations of the past and the desire to save companies on the brink of bankruptcy, the state seems to be sailing on sight and in the short term contrary to what it affirms.

But the EPA is not the only tool available to the state shareholder. It can intervene indirectly via Bpifrance which is a 50% shareholder with the Caisse des Depots et Consignations. BPIFrance favors minority shareholdings in SMEs and medium-sized enterprises (SMEs) with a prospect of exit at the end of a stage of their development.

The State shareholder portfolio

Thus, our state is far from being deprived to intervene in the management of companies and its position of influence is unique in the western countries. But what does he do with this power? Through the APE, it participates in the appointment of 765 directors of companies with a total consolidated turnover of 147 billion euros. This means that its scope of interventions is very broad.

The amount of its investments in 2015 amounted to 90 billion euros. These holdings yielded 3.9 billion dividends in 2015, compared to 4.1 billion in 2014. For 2016, the forecast in the budget is 1.9 billion euros (excluding EDF shares). This decline in income for the EPA is accompanied by a drop in the shareholder return of the portfolio, which has become negative (-9.95%) due to the collapse of so-called "utilities" values.

If these shares were taken out, it was 28.9%. Note that this return takes into account the divestment operations (Engie, Safran, Adit, Toulouse Airport). Fiscal year 2015 was also marked by a negative net result of the State's shareholdings of 10.1 billion euros. These losses are due to "non-recurring" items such as depreciation of assets of SNCF and EDF, the fall in the price of oil and gas for Engie (ex GDF Suez), the cost of the waste storage project Radioactive Cigéo, etc. With such figures, it is not surprising that the performance of the state portfolio is lower than that of the market.

Interventions by the investing State

However, comparing the stock market performance of the EPA portfolio with that which the market can make through the performance of the CAC 40 is not necessarily relevant insofar as the EPA also has the task of "intervening In rescue operations of companies whose failure would have systemic consequences ", in short to save lame ducks. On the other hand - and there is no contradiction - the EPA must "ensure the fair remuneration of own funds and in the composition of the portfolio to optimize the strategic return of the public euro invested. Difficult in these conditions to make coherent arbitrations. Only the will of the prince must make it possible to resolve these conflicts of objectives.

The principal justification for the presence of the State as a shareholder in the capital of undertakings is, according to the guidelines of its action, "its capacity for intervention or anticipation of its own" and that its intervention "falls within the In favor of projects which may have a delayed return ".

In short, the state would be a wise, visionary investor with a long-term commitment, the very opposite of what is supposed to be private shareholders. One wonders why other countries have not thought about it and why they often enjoy a better competitiveness. In addition, many of our large listed companies with a totally private shareholding are doing well and have a long-term vision. On the other hand, the latest developments in state action do not necessarily prove its presence.

As an illustration of the more or less successful State interventions, we can mention the case of Renault with the intervention on the remuneration of its CEO, the case of EDF or the case of Alstom.

For a disengagement

The multiplicity and variety of State interventions make the legibility of its action a problem. The State, by pursuing several objectives, sometimes antagonistic, seems to act rather as a firefighter in an emergency than as a long-term strategist (see the Alstom case). Torn between political and trade union pressure, the government does not always know where it is headed, except to save time from now until the next election. Add to this the political choices that can vary over time following the elections and do not foster a long-term vision on the part of the State.

So should we end the state ownership as suggested by Professor Jean-Marc Daniel ? Presumably, yes. In his presidential candidate program, François Fillon promised to resume privatization. This proposal should not frighten us. After all, the Jospin government did not hesitate to privatize more than its predecessors. This program, which was abandoned during François Hollande's five-year term, must be resumed.

Such disengagement from the state in companies that are part of the competitive sector will generate significant room for maneuver and allow the State to focus on its core missions. That being so, and as the United States very well knows, we must not exclude the possibility for the state to intervene punctually and in a limited way in time to save a particular company that is in difficulty. In this regard, we think of the successful action of the US government to save car manufacturers seriously affected after the subprime crisis in 2008.

Beyond calling into question the role of the shareholder state, individual shareholders should be strengthened by encouraging capital investment and the creation of pension funds by capitalization in addition to pay-as-you-go pensions. In this respect, taxation on capital that is too heavily taxed in France (ISF + tax alignment on capital income over labor income) will also need to be reviewed. Today, more than 50% of the capital of our flagship CAC 40 is held by foreign investors. It is also, unfortunately, another specific feature of our economy. Instead of making fine speeches on economic patriotism, action should be taken to ensure that the French effectively regain power in the capital of their enterprises.