In the face of the increasing power of speculative funds, which are extremely aggressive, and of sovereign wealth funds, which do not only obey to economic logic, there's no reason for France not to react," Sarkozy said in the first press conference held since he was elected. "France must protect its companies."
The French President said government-controlled Caisse des Depots et des Consignations, or CDC, should be the government's arm called upon to "promote the primordial economic interests of the nation."
Sarkozy has often taken credit for saving French train and power station maker Alstom SA (1022047.FR) in 2004, when the company was on the verge of bankruptcy and vulnerable to a hostile foreign takeover. Sarkozy, who was then Finance Minister, battled at the European Commission defending the partial nationalization of the company.
The 21% stake the French government held in Alstom was then sold to Bouygues SA (12050.FR), the country's largest builders. Bouygues and Alstom are now rumored to be considering a government-sponsored three-way merger with state-controlled Areva SA (CEI.FR), the world's largest maker of nuclear power stations.
France has long resisted foreign takeover bids, with the government vowing to defend the food giant Groupe Danone SA (GDNNY) against a possible takeover bid from U.S.'s PepsiCo Inc (PEP) in July 2005.
National champions, an important feature of French economic patriotism, have often ensued from the process.
Sarkozy is credited with using political muscle to force the merger that in 2004 created French drugs giant Sanofi-Aventis SA (SNY), fending off a possible bid from Swiss rival Novartis SA (NOVN.VX).
Former Prime Minister Dominique de Villepin, who had thundered against international capital, continued on this line when he successfully blocked an attempted takeover of Gaz de France (1020848.FR) by Italian power behemoth Enel SpA (ENEL.MI) in February 2006. He arranged a merger with French power and waste management company Suez SA. (SZE.FR)
"That's a temptation many countries have, and it's very much alive in France," said Jean-Christophe Caffet, an economist at Natixis. "Still, it can go only so far before infringing international treaties and European Union rules."
Over half the capitalization of CAC40 companies, the largest companies by market capitalization whose shares are traded on the Paris stock exchange, are owned by foreign investors.
The Caisse des Depots and Consignations, which is formally independent from the government, holds EUR37 billion in shares of traded companies, including European Aeronautic Defence & Space Co NV (5730.FR). In 2006, it paid back to the state EUR1.5 billion in dividends from its participations.
The French President also called for the need of moralizing financial capitalism, as he noted that the subprime crisis and the financial turmoil that ensued has made the balance shift on his side.
"Financial capitalism needs to be moralized," Sarkozy said. "Several countries agree now that the fundamental values of capitalism are those of the effort, of labor, of enterprise and not those of speculation, or rent and of luck and that through financial markets shareholders can't decide alone of the economy."
German Chancellor Angela Merkel and Sarkozy are leading the push for stronger regulation, blaming the banks that made risky bets on U.S. subprime mortgages and the ratings agencies that graded these investments for the current financial-market turmoil