French President Nicolas Sarkozy said the government and a state-owned lender will raise 6 billion euros ($7.6 billion) to create a sovereign fund aimed at protecting and developing the country's ``strategic companies.''
The creation of the fund is aimed at implementing Sarkozy's plan, announced last month, of protecting strategic French companies from ``foreign predators'' and helping them survive the global financial crisis. The turmoil has wiped out about 45 percent of the value of the benchmark CAC 40 index, choked bank lending and left businesses struggling to find financing.
``I won't let foreign funds get bargains thanks to the current levels of the stock market,'' Sarkozy said today near Tours, central France. ``I won't let French industry move out.''
You can think that this is another instance of silliness by the French--and a worrying sign of the kind of protectionism that we will be increasingly seeing. Or you can believe that the stock markets have overshot and that the acquisition of controlling stakes in domestic companies by foreigners at fire-sale prices is an unnecessary transfer of wealth outwards. If you think the latter, it may make sense for a government (that is less liquidity-constrained than domestic private investors) to engage in this kind of activity.
Of course, the French government could simply try to prop up the French stock market by buying equities across the board. But presumably that is a lot more expensive than selective purchases in firms most likely to fall into foreign hands.