Macron-Style Capitalism Is Taking Over in Europe

(Bloomberg Opinion) -- “Europe is starting to turn French,” according to Zaki Laidi, a professor at Sciences Po in Paris and former government adviser. It’s a compelling argument, and not just evidenced by Germany being pulled toward President Emmanuel Macron’s position on issues like European-wide industrial policy, climate change and U.S. tariffs.

Now, even the pragmatic, liberal, fiscally conservative Dutch have opted for French-style state intervention with the purchase of a $775 million stake in Air France-KLM. The hitch is that in trying to emulate Macron’s penchant for dirigisme (France already owns 14 percent of the Franco-Dutch airline), the Netherlands will probably end up butting heads with him too. Shareholders are right to be spooked.

As stake-building moves go, this Dutch swoop feels somewhat similar to the recent dramas around Renault-Nissan, which were caused in part by Japanese resentment about the out-sized influence of France in the giant carmaking alliance. The French weren’t informed about the Air France-KLM move until an hour before the Netherlands unveiled its 12.7 percent stake.

Macron-Style Capitalism Is Taking Over in Europe

That doesn’t exactly back up the Dutch claim that this is about better “cooperation” between the two national arms of Air France-KLM. The language of the statement was very much geared toward defending Dutch national interests: Jobs, KLM’s home hub of Schiphol Airport in Amsterdam, and trying to address a lack of influence on future strategy at the holding-company level. “Direct involvement is required,” as the Dutch finance minister put it.

The source of Dutch frustration runs deep, and lies in Paris. As with Renault-Nissan, Air France-KLM is not an equal partnership in terms of power and profits. The French state is the number one shareholder and enjoys voting rights of about 23 percent, yet KLM contributed 80 percent of group operating profit in 2018.

And, as at Renault-Nissan, the French preference for ever-closer union as a way to fix operational problems has sparked resistance. That spilled into the open this month when the Air France-KLM CEO Ben Smith toyed with the idea of replacing the Dutch unit’s boss. This didn’t happen, but Smith took a spot on the KLM division’s board, raising local hackles.

Given all this, it’s not unreasonable for the Netherlands to want to take matters into its own hands. But the reaction from shareholders – the stock fell more than 11 percent on Wednesday – tells you what the market thinks about having even more political interference at the top table, and competing voices too. 

Restructuring plans, cost cuts and other needed overhauls will probably get harder, not easier, and the company is likely to be less shareholder-friendly. Ideally, this would cause policymakers to think twice, especially those with a history of hands-off approaches to capitalism. But in the current “winner-takes-all” mood of countries protecting their own interests and using taxpayer money to do so, the fashion for French-style interventions is here to stay.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.

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