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Last Updated: Thursday, 31 July, 2003, 13:06 GMT 14:06 UK
France shakes up state giants
Jean-Pierre Raffarin
Mr Raffarin has promised sweeping reform
The French Government, which has promised big reforms to stimulate the country's economy, has started to shake up some of its biggest state companies.

The government has adopted a bill which will allow the state share in France Telecom to drop below 50%, a move that paves the way for its full privatisation.

The move comes the day after the finance ministry challenged Electricite de France (EDF) and Gaz de France (GDF), the country's titanic energy firms, to draw up ambitious plans to develop their businesses in a deregulated environment.

Forcing firms like EDF towards greater independence is a central plank in European Union policy, which has long been suspicious of the favouritism shown to France's corporate champions.

But it will be highly controversial within France, where unions and others on the left have already repeatedly demonstrated against the government of Jean-Pierre Raffarin.

Private lives

The complete privatisation of France Telecom - which was floated on the Paris and New York stock markets in 1997 - could still be some time away.

The firm says it has no plans to a sale, and unions have expressed their strong opposition.

But the move would be the culmination of a rapid turnaround at the company, which endured traumatic losses and thousands of job cuts earlier this year.

Earlier this week, France Telecom unveiled a profit of almost 5bn euros - without counting restructuring costs - for the first half of this year, saying it had remodelled its business along highly efficient lines.

Privatisation would also be welcomed by France's critics, who argue that the company is competing unfairly in international markets, thanks to its majority state ownership and preferable access to finance.

Not fair

The argument about unfair competition has also been levelled at EDF and GDF, particularly in the light of an extremely aggressive international expansion campaign by the electricity firm.

Demonstration against pension reforms
The government already faces opposition
The European Commission is looking into EDF, responding to complaints that the firm benefits from international privatisations, while keeping a protected share of its home market.

The Raffarin government says it has already opened up more than one-third of the French market to competition, resulting in falling power prices.

Although the finance ministry has not spelled out its precise plans for EDF and GDF, Mr Raffarin has previously said that part-privatisation is on the cards.

Much now depends on how the two companies respond to the ministry's call for strategic plans.

Big ideas

The moves are the latest stage in the French Government's reform plan, which already looks like being the biggest economic shake-up to hit France in decades.

The government has so far concentrated on budgetary reforms, notably reducing pension and other benefits to public-sector workers.

Mr Raffarin has promised to make France more business-friendly, and has said that red tape is a barrier to the development of an enterprise culture.

In moving big state firms towards the market, the government is also motivated by the weak condition of state finances, which have seen France breach EU rules on fiscal stability this year.

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26 Nov 02  |  Business

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