The European Commission’s opposition to the Alstom/Siemens merger belongs not in the 21st century, but in last century’s old economic mantras. The Commission doesn’t seem to have fully taken the measure of how much our world has changed.
Bernard Spitz is the President of FFA and of the European Committee at Medef. His last book is “Merci l’Europe !: Riposte aux sept mensonges populistes” (Thanks to Europe: Answering Seven Populist Lies).
The resulting merged entity, which may have held a dominant position on the European continent, would have remained modestly-sized compared to its Chinese rival. And once the Chinese competitor, thus unopposed, managed to gobble up another European company, it would be too late: there are lost opportunities you can never make up for. The balance of power will have been broken, to our clear detriment. I shall mention two reactions that only confirm the EC’s anti-merger decision to be a costly mistake. First, Alstom’s and Siemens’s competitors are delighted. This is evidence that the merger would, in fact, ramp up, not kill off, competition. Second, Alstom’s and Siemens’s customers, like SNCF, the French railways, are aghast: proof enough that we could have expected economies of scale and efficiency gains from the new entity.
Europe remains stuck in an uncertain present, while the world’s top entrepreneurs look to the future. Today’s mergers create the leaders of tomorrow. They will not only help create future jobs, but also defend Europe’s economic sovereignty, when faced with the imperial ambitions of other continents’ giants.
Our businesses apply a strategic vision to business concentration. They assess their effect over time, in the full awareness that the balance of international power is constantly changing, that new technologies replace old paradigms and value chains, that new players are emerging. Europe’s short-term approach here is myopic. Surely our aim must be to get ready today to face tomorrow’s competition? We need an industrial strategy of the kind that built Airbus, an excellent example of voluntarist policy that enabled Europe to become a major aerospace player.
This short-term approach is not specific to competition law. It tends to spread and penalize all sectors. In prudential matters, Europe imposes on insurers inappropriate capital charges in relation to risks. It penalizes the asset classes that are most useful to the productive economy (equities, infrastructure investment, private equity), slows down necessary innovation funding, and increases volatility. Its required accounting standards encourage a short-term view of balance sheets by overusing the notion of “market value” — subject to permanent fluctuations, rather than readability of performance. Whenever Europe sticks obdurately to a short-term vision, it loses — and all of us lose as well
This short-term vision is economically and socially damaging. In the face of rising inequalities, fears of downward mobility, and the resurgence of social tensions, the only answer lies in a mix of short-term choices and long-term policies: education, health, communication networks, energy transition. Encouraging long-term financing of such key infrastructure, taking advantage of low-interest rates, is the best possible way to shore up business activity and overall resilience. This was the conclusion reached by the special session of the Argentina G20. Investing in the long term, promoting resilience: that is the precise role of insurance. When faced with financial markets volatility, insurers protect our long-term savings while financing the economy. In today’s rising risk environment — from natural disasters to cyber attacks — insurance is a shield protecting both individuals and business competitiveness.
Excessive caution on behalf of the consumer may penalize the citizen. When we question European institutions and ask whether they worry at all about the social and civic consequences of their choices, their invariable answer is: it’s not in our remit.
Here lies the real problem. It’s not so much technical, as, primarily, political. Europe needs an aggiornamento to project itself into the future: true leadership, of the precise kind Europe is missing. Without it, we shall not be able to assert our sovereignty, to encourage more inclusive growth, to convince our citizens, young and old, to trust us to ready them for the challenges of the world of tomorrow, all of which know no borders and will ply out in the very long term.
Europe is the only solution for her citizens to have agency, provided it can truly reinvent itself. This is what will play out in the May 2019 elections, and in the months that will follow.