Commentary: France's Finance Minister Has a Dealmaker's Instinct

For six months, Francis Mer kept people guessing. As the ex-president of steel giant Arcelor and the first businessman ever to head the French Finance Ministry, would he handle the job differently from the mandarins who preceded him? Now, the guessing is over. In conducting a surprise weekend auction of the government's stake in bank Crédit Lyonnais, Mer showed the shrewd instincts of a dealmaker as he reeled in a rich $2.2 billion from BNP Paribas. He also challenged the clubby traditions of France's banking Establishment by ensuring that Lyonnais' fate would be decided by market forces rather than backroom deal-cutting. "This is not how our predecessors wanted to do it, but we see our role differently," says a close adviser.

It's a welcome change. Although the government sold most of its shares in the country's banks by the 1990s, French politicos have continued treating them as state-run enterprises. After selling nearly 90% of Lyonnais in 1999, the Finance Ministry wanted to pair it with another French bank, to lessen the chances that the relatively small Lyonnais might fall into foreign hands. The favored French suitor: Cr´dit Agricole, which already owned 10.5% of Lyonnais. Mer's two most recent predecessors, both Socialists, tried unsuccessfully to broker a Lyonnais-Agricole tie-up.

Enter Mer. He was well-acquainted with Lyonnais, having served on its board until his Cabinet appointment last May. Because Lyonnais and Agricole had resumed talks earlier this year, Mer at first didn't interfere. But by fall, it was clear the talks were stalled, and Mer was exasperated. He gave Agricole one last chance to buy the government's stake, for $1.6 billion. Agricole said no. A day later, on Nov. 22, Mer announced he would accept bids for Lyonnais until 6 p.m. the next day, a Saturday. A source close to Mer says he reasoned he'd get better offers if bidders were caught off-guard. He was right. Lyonnais and Agricole execs were outraged, and so were Lyonnais' unions. Tant pis. The cash will be a boon to the center-right government of Prime Minister Jean-Pierre Raffarin, which faces mounting budget deficits as the economy is forecast to grow by only 1% this year.

The question now is whether the government will show the same bold spirit in pursuing its remaining economic reform agenda. Mer has promised to push ahead with privatizing such politically sensitive holdings as Air France and utilities Electricité de France and Gaz de France. But Raffarin's government has been more cautious in acting on other promises, such as paring government spending and overhauling the state-financed pension system. One reason: The last such effort, in the mid-1990s, was derailed by mass protests. But as the Lyonnais auction showed, bucking the system can be worth the risk. Bravo, Monsieur Mer--and encore!

By Carol Matlack

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