(Bloomberg) --
France is ready to use the ultimate weapon to protect its biggest companies from the market turmoil set in motion by the coronavirus: nationalization.
As the government tears up its budget plans and promises billions of euros to support the economy, Finance Minister Bruno Le Maire said the state could intervene using any means to protect the country’s biggest companies.
“I will not hesitate to use all the means available to me,” Le Maire said. “That can be capitalization, that can be by taking stakes, I can even use the term nationalization if necessary.”
Such a move would upend the economic philosophy of President Emmanuel Macron, who came to power in 2017 promising to pare back the omnipresence of the state in economic life.
Now, with most workers confined and businesses shutting activity, that could be reversed, with the state taking over the economy in an unprecedented way. Macron’s reforms -- including the flagship overhaul of pensions -- are also suspended.
Such a dramatic move would chime with Macron’s warning to France in a televised address on Monday night, when he said “we are at war.”
EU Wants ‘Action’
Separately, a draft European Union document says curbs on state handouts should be loosened to aid virus-stricken industries, There must be “swift and effective action” amid warnings the continent is heading for a savage recession.
The coronavirus disruptions have sent financial markets into turmoil, despite efforts by governments and central banks to limit the economic damage. The shutdown of swathes of the world’s economy, with travel bans and workers confined at home, has also triggered a meltdown in global fuel demand.
In France, the CAC40 index is down 37% since the beginning of the year.
Stimulus Plan
Le Maire brandished the possibility of nationalizations as he gave details of an emergency budget that will include 45 billion euros ($50 billion) of spending to cover salaries of furloughed workers and support companies, plus 300 billion euros of loan guarantees. France’s debt will rise above 100% of economic output.
The action is based on the economy shrinking 1% this year. But even that is only a provisional figure that could be much worse depending on how the epidemic evolves in the coming weeks, according to Le Maire.
“This economic and financial war will be long,” Le Maire said in a telephone briefing with journalists, echoing Macron. “It will be violent and will require all the strength or our nation,” as well as Europe and the Group of Seven, he said.
Nationalizations and recapitalizations could involve delicate and complex negotiations with other nations. The Dutch and French governments have already discussed a recapitalization of Air France-KLM, but any move must be coordinated so that the two states aren’t diluted, a person familiar with the discussions said.
Italy has stepped up efforts to keep bankrupt Alitalia afloat, with a new 600 million euro loan under discussion as part of a plan to re-nationalize the carrier.
Le Maire said France is also ready to intervene in other ways to calm markets. He said the AMF stock market regulator’s decision to ban the short selling of 92 stocks in Tuesday’s session is “good and necessary,” but that France is ready to go further by banning short selling for a month.
“We stand ready to take stronger decisions if necessary. We want to avoid speculation on markets.”