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France tries to privatize power { June 17 2004 }

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June 17, 2004
In France, Protesting Privatization


IN some countries, employees join companies in the hope that their new employer will soon sell stock to the public. In France, workers go on strike and engage in civil disobedience to prevent even the possibility of such a thing happening.

Protests this week by workers at Électricité de France included ripping out wires to homes owned by Jean-Pierre Raffarin, the prime minister, and his predecessor, Alain Juppé, on Tuesday. Yesterday, power was briefly interrupted at the Eiffel Tower, which said that it used emergency generators to assure that tourists were not trapped in the elevators; there were also power disruptions at other places, including the presidential palace and the United States Embassy.

The workers were protesting the government's plan to convert the government-owned gas and electric utilities into government-owned companies, a step that could eventually lead to an initial public offering.

The protests have had an effect, leaving an impression of a vacillating government.

On Tuesday night, Nicolas Sarkozy, the finance minister, in what was seen as a move to delay and pacify workers, said a commission might be named to study whether a sale was truly necessary to raise capital for the utility.

"Once the new law is voted, one could well imagine the state remaining a 100 percent shareholder for years," he said. "Nothing says the state needs to cede its stake."

But yesterday, he told Parliament that while no sale was likely before mid-2005, "Don't doubt for one minute that my determination to see through the reform is total."

The government has tried to satisfy worker objections to an offering by assuring that it would retain at least 70 percent of the stock, that workers would be represented on the company's executive board and that they would retain their jobs and pension benefits.

Those pension benefits, which allow the average utility worker to retire at age 55, are one reason the utility is likely to need new capital. The French government would face objections from the European Union if it simply put up more cash, and that is one reason a public offering is being considered.

In some other countries, employees of small companies hope that a public offering will follow because they are often paid in part with stock or stock options whose value could soar once the company goes public.

But workers at Électricité de France fear their pay and benefits would be in jeopardy if outside investors came in. That might mean that management would be accountable to investors, not just to a government that in the past has not shown itself willing to resist union demands for long.

The men who tore out Mr. Raffarin's electric meter, wearing masks over their faces and union emblems on their hard hats, were not arrested.

The union position does not appear to be widely unpopular in France, where much of the public feels solidarity with workers resisting pressures on their incomes and standard of living. Some think resentment of the unions is growing, but complaints are usually muted if disruptions are brief, like the one that snarled rush-hour subway service in Paris last week.

There is an innate suspicion of financial markets and the pressures they bring. Rather than seeing union actions as being outrageous attacks on public services, many view them as a defense of the principle that public services should remain public - not be privatized and put at the mercy of capitalists who would put profits ahead of quality service.

Or, as the banners said as workers marched peacefully in Paris: "No to privatization. Yes to nationalized public services."

If the privatization of Électricité de France is sidelined, the result will be another embarrassment for the government, which has shown a repeated willingness to back down when confronted by angry unions.

President Jacques Chirac might not mind so much, given that Mr. Sarkozy will have been the public voice both of the effort to win approval of a privatization bill and of the retreat from that plan. Mr. Sarkozy is widely seen as a possible challenger should Mr. Chirac seek another term.

For investors, it is another reminder of the difficulties and the ambivalence of the French privatization program. The motivations for the program include the need to comply with European Union directives and the government's need for cash but do not reflect a consensus that privatization is good in and of itself.

It took years for the government to finally bring to market an offering of shares in Snecma, the state-owned aerospace company, but Mr. Sarkozy pressed to complete it after he took office this spring. The shares are expected to begin trading tomorrow after the offering is completed, with an announced price range of 15.45 euros to 17.20 euros a share. The sale will raise as much as 2 billion euros, less than had been hoped but enough to help the government's budget.

If the sale of stock in Électricité de France does take place, the prospectus no doubt will detail the concessions already made to the workers, which included promises that they would own substantial stakes and that employment levels would increase. Investors reading that, and recalling this week's angry protests, might not be very eager to buy the stock anyway.

Copyright 2004 The New York Times Company

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