The last-minute peace deal between French President Francois Hollande and steel tycoon Lakshmi Mittal may have saved everyone’s face for the time being. ArcelorMittal plants in France will remain open and job losses will be averted after the government backed away from nationalization threats.
But the damage to Paris’s reputation will be long-lasting.
The world has seen France as a defensive, declining power that can take a xenophobic and—according to some sections of the Indian press—even borderline racist attitude to foreign investors, especially if they come from rising Asia where Europe’s second-largest economy once ran a vast colonial empire.
The personal attacks on Mittal began last week when the paradoxically titled Industrial Recovery Minister Arnaud Montebourg lashed out at billionaire Mittal and his French operations for “lying” and “blackmail.” The minister went so far as to say the company, which employs 20,000 in France, should “get out” of the country because it had failed to show “respect” by planning to shut down two mothballed blast furnaces, resulting in potentially hundreds of job losses.
A poor grasp of basic economics, business imperatives and global financial conditions was demonstrated by the minister, unions and even former senior figures in ex-President Nicolas Sarkozy’s centre-right administration. All of them joined the crowd baying for Mittal’s metaphorical head, although the head of France’s large employers’ association MEDEF, Laurence Parisot, said the threats of nationalization were “scandalous.” A front-page Le Monde editorial also lambasted Montebourg and Hollande for jeopardizing foreign investment with their intemperate words and threats.
Mittal after all faces a global slump in steel demand, huge losses and falling profits.
The menace of nationalization was squarely put on the table by Montebourg and never ruled out by Hollande, who held tense meetings with Mittal at the Elysee Palace this week. A deal was finally struck last night, effectively sidelining Montebourg and the unions’ push for a state takeover of ArcelorMittal’s Florange operations in Lorraine.
Meanwhile Mittal’s company said it had reached a “good agreement” with the French government, promising to invest $180 million in steel operations and pledging no compulsory layoffs at the contested Florange site in Lorraine.
But since Montebourg went on the warpath against Mittal there has been outrage in sections of the Indian press and online, a furious reaction that has also been noted in France. Rajesh Pandathil, writing for online publication First Post, declared: “This is not socialism, but racism.”
In the Economic Times, columnist Sanjaya Baru argued that “the brouhaha in France is… about trade unionism and, perhaps, racism,” but that “Indian firms going global need to learn the art of dealing with geoeconomic challenges.”
Invoking France’s reaction to Mittal when he first made a bid for Arcelor, Noopur Tiwari in India’s Business Standard wrote:
Attacks on ArcelorMittal always take on a harsh personal tone and tend to be insulting, even xenophobic. In 2006, when Mittal Steel was making a bid for Arcelor, Guy Dollé called Mittal Steel “an organisation of the past” and said it was “full of Indians.” Not much has changed … Lakshmi Mittal has become a scapegoat for the malaise in France over job losses.
He also noted that French’s left-wing unions, with their first Socialist president in decades are describing Mittal as a “predator” and that they must be saved from his “claws.”
For all the ambivalence in India towards Mittal, who lives in the UK and whose steel behemoth is headquartered in Luxembourg, with 38% of its operations in Europe and uncertain plans in his mother country, Indian pride has been pricked. The French are being tagged as hypocritical in their attempts to kick out the billionaire steel magnet seemingly because he comes from the subcontinent.
Of course, Mittal is hardly a sympathetic figure, but he appears unfairly targeted because he is “nouveau riche” in the eyes of the French. And he hardly fits the mold of the kind of wealthy man the French ruling class likes. Indeed, in 2006, Mittal was lectured by then-finance minister Thierry Breton when he wanted to merge Mittal with Arcelor for not understanding the “etiquette” of French business. And Montebourg and French politicians were far more lenient on French-owned multinationals like Peugeout and Sanofi-Aventis when they recently announced massive job losses in their thousands.
The French political establishment across the parties is too cynical. It is profiting from rising populism and desperately trying to shift blame for soaring unemployment—it has risen for the 18th consecutive month to the highest level in 14 1/2 years, with more than 3 million jobless—and sinking competitiveness on to the foreign bogey. Apparently globalization is a one-way street for many French. Mittal has become a convenient scapegoat for the panic and fear gripping French politicians and voters about rising Asia and outsourced jobs.
It’s so much easier to blame big business and outsiders for France’s woes instead of turning the screws on the fossilized, cowardly political elite and even French voters’ unwillingness to accept structural reforms. Mittal’s crime is to be a foreigner, and especially an Asian, who made his own fortune and billions. Even worse he has a vulgar propensity to display his wealth in an ostentatious fashion. The French media refers constantly to when he invited Kylie Minogue to Versailles for his daughter’s lavish rumored $78 million wedding in 2004 at Versailles and chateau Vaux Le Vicomte.
But LVMH boss Bernard Arnault from LVMH isn’t exactly discreet about his riches (although even he was recently told to “Piss off Rich Bastard” on left-wing daily Liberation newspaper’s front page). And neither are a lot of Europe’s other business leaders.
This whole episode has played out like like far-right demagogue Marine Le Pen is running French government policy. And all this from a Socialist administration that should know better than to flirt with coded economic racism. France is the biggest loser in this fracas.