When France announced their bailout package to the car industry, it came with a covenant: keep jobs in France. This immediately raised the EU’s ire of the EU. Free trade commissar Neelie Kroes spat into the direction of Paris: “If the help comes with conditions, for instance to keep production in France, then these measures would be illegal and would not be approved by us.” After the whipping from mistress Kroes, the Sarkozy government France struck the clause from the bailout package—and then claimed a “moral obligation” for the French to stay in France. Brussels was displeased with the French moral imperative, especially when Renault is still 15.7 percent in government hands, considering that the government/industry relations in France can put a zaibatsu in Japan, or a company owned outright by the Chinese government, to shame. A wary eye was kept on France ever since. Yesterday, it turned into an angry stare.
“Fears that France’s €7.8bn state aid package for its car industry is protectionist resurfaced on Friday when Renault announced that it was relocating production of one its small cars from Slovenia to a plant in France,” the Financial Times [sub] reports.
It all started with French industry minister Luc Chatel boasting that Renault was to “announce the repatriation of the production of one of its vehicles” to an assembly plant in Flins, west of Paris and that the French government aid package was “beginning to get results.”
Immediately, klaxons sounded in Brussels. Officials fired off an angry letter to Paris asking it to explain the apparent contradiction with earlier French promises. Neelie Kroes found the remarks “highly surprising.”
Then, a backpedaling of Tour-de-France proportions ensued. Revoz, Renault’s subsidiary in Slovenia, explained that production of the Clio 2 was being mostly moved back to Flins because the plant at Novo Mesto, east of Ljubljana, was at full capacity and would now concentrate on making the Twingo, a small car for which demand has surged.
Nicolas Sarkozy went public. France’s president claimed the change “would not take a single job from our Slovenian friends.”
Says the FT: “Renault’s clarification is likely to reassure the Commission but it will do nothing to dissipate its anger at Paris over its handling of the car industry bail-out. Mr Chatel’s remarks are the latest example of French ministers playing by EU rules when talking to Brussels while also giving their public the impression that French jobs and factories will get preference.”
Well, if one’s government were to spend billions bailing out a national industry, it would be pretty stupid to let all that money just flow out the country without benefiting said country (exactly like AIG paying out their dues to Barclays, Deutsche Bank, BNP Paribas, Credit Suisse, Societe Generale, HSBC, UBS and more with their bailout haul).
Sure it’s the wrong thing to do, but the problem is bailing these guys out was wrong to begin with. We’ve already taken a wrong turn, might as well keep going and go full circle, right?
These guys (politicians) don’t know -or care- about cars, they’re trying to get out of this looking slightly less bad than the next guy. The people want jobs? Let them have jobs!
@Kablamo: The problem is, it’s against EU rules.
What a bunch of hypocrites. I think the Brits are smart to stay at arm’s length from the EU.
James2: what are you talking about? the UK is one of the founding members of the EU.
I think the French people should be punished to only be allowed to drive Renault. Then they will be seen in those ugly cars on the side of the road after they broke down.
Kaleun,
The UK joined the EU in 1973. The founding members were France, Belgium, The Netherlands, (West) Germany, Luxembourg and Italy.
Bertel,
As I mentioned in my article a few days ago, it doesn’t matter whether it’s against EU rules or not. The French government strongly inferred to the car companies to keep French factories open. Thereby, circumventing EU rules since nothing was officially stated.
Expect a global depression very soon….and you can blame the French for it!
Did anyine seriously expect the French to do anything else – after all, they all went to the same schools etc, and it would be embarrassing at dinner.
Mr. Schmitt:
Yes, it’s against EU’s rules, but don’t the larger members of the EU just do as it suits them when push comes to shove? All the big ones and not just the French?
I’m not saying I agree w/ it, but that’s just how it is.
We have similar problems down here in Mercosul. Brazil, akin to Germany in Europe, being the most “successful” and “bigger” member tries to play by the rules and stimulates the others to do as well, but Argentina, whenever it feels the need, starts doing whatever it wants. Recently it made so much noise about the deficit in car trade w/Brazil that it scared Honda into investing in a new plant there and not Brazil. It has also taken many steps to hinder the entrance of Brazilian products into their market by imposing a new set of non-tarrifary barriers. What can Brazil do? Invade Argentina? As if…We do what we can, that is talk, and sound off to the press. And the Argentinians talk…And in the end do what they feel they must.
I’m [partly] with kablamo on this. When it comes to bailouts, you don’t need no stinking badges.
French protectionism might stick in the free market craw but they don’t view socialism the way the Americans do.
France is acting so Obama like.