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Nationalizations Take Off In France

testosteronepit's picture




 

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

The nationalization debate has been sizzling on France’s front burner since last week when Industry Minister Arnaud Montebourg lashed out at the world’s largest steelmaker, ArcelorMittal. He threatened to nationalize its plant in Florange where some old blast furnaces had been shut down for a year-and-a-half. At stake were 2,500 jobs. “We no longer want Mittal in France,” he told the Indian owners—though the company has 20,000 employees in France.

Breaking into a cold sweat, executives around France reevaluated their investment plans. Just then, unemployment hit a 14-year high. Creating jobs was needed more than anything. Scaring off investment was not. Whether his threat was a form of extortion or an announcement of a hostile takeover remains to be seen. But it opened the door for unions at another troubled company to demand nationalization, and the socialist government might not be able to resist.

The three unions—CFTC, Solidaires, and Force Ouvrière—that represent the workers at the shipyard Chantiers de l’Atlantique at Saint-Nazaire on the Atlantic coast demanded in a joint statement today that the government “must become totally involved  to guarantee the future of the shipyards” and must become “a majority shareholder.” Jean-Marc Perez, Deputy Secretary of the Force Ouvrière, clarified: “Nationalization is unavoidable.”

Chantiers de l’Atlantique is famous for building the largest cruise ships and supertankers in the world, including the Queen Mary 2, the largest ocean liner ever. But it’s in trouble. Its future is uncertain. Its order books are empty; no new orders are coming in. By 2013, after finishing the current projects, it will be practically without work.

MSC Croisières, its largest customer, put on hold any further investments in cruise ships. Last April, Viking Ocean Cruises cancelled its two cruise-ship orders that had been announced with fanfare just a few months earlier. And a proposal for new ferries for SNCM, a ferry operator in the Mediterranean, isn’t likely to go anywhere—SNCM was privatized in 2006, though the French government still owns 25%. And if the shipyard wants to diversify into offshore oil and gas rigs and windmills, two of the few sectors still doing well, it will face competition from companies around Europe that have specialized in it for a long time.

Employment at the shipyard is down to 2,100 workers, the lowest in its history. Of those, about 1,000 are on partial unemployment. Of the 4,000 subcontractors who still worked there a few months ago, only a little over 1,000 are left. It’s tough for companies in France [Stimulating The Public Sector, Suffocating the Private Sector].

In their desperation, the unions appealed to Montebourg for help, initially last June. Over the summer, they asked for another meeting. Without response. To draw attention to the “silence of the government,” 500 workers went on a one-hour strike at the end of September. Voilà, on October 15, when Montebourg was in Nantes for another event, the union leaders got their meeting.

Afterwards, instead of making earthshaking announcements, he only said that the government would do “its utmost” to defend the shipyard. “Our position is to find economic solutions, in other words, work,” he said. That was a bit too wishy-washy for the union leaders.

But they did sense that he was determined to maintain the shipyards and the special skill sets. Hence hope that the shipyard might not be closed and that a government sponsored program could retrain workers to build offshore oil and gas rigs or windmills. But diversification, if at all possible, would take time. The immediate solution was nationalization. Once the state owned it, closing the shipyard and laying off workers would become, for a socialist government, politically infeasible.

But ownership is already complicated. One of the largest shipbuilders globally, STX Europe owns 66.66% of the shipyard. Headquartered in Oslo, it owns 15 shipyards around the world. It, in turn, is owned by the Korean group, STX Corporation. And who owns the remaining 33.34%? The usual suspect: the French government.

The unions are blaming the majority owners, “the Koreans,” a convenient and distant target. “We don’t see the Koreans, they have done nothing. It’s the state, a minority shareholder, that finds itself playing substitute boss, even though that’s not its role,” said several union sources.

So begins another melancholic chapter in the deindustrialization of France. While privatizing state-owned companies has been all the rage since the mid-nineties, by socialist and conservative governments alike, the current morass in the private sector has stopped that process. The dominoes are lined up. Nationalization is being brandished as a solution.

The government, once it owns a controlling share, could force companies to continue operating and employ people, whether or not they have any work. But it’s an illusory solution. The government already owns a third of Chantiers de l’Atlantique, as it owns major stakes in many large companies. Some, like mega utility EDF, it owns outright. Despite—and cynics say, because of— this profound government ownership, the private sector is in deep trouble, and even more government ownership is unlikely to cure its ills, but might strangle it altogether.

In France, socialism isn’t a political movement that swept the elections. And it isn’t an economic philosophy that moved once again to the forefront. But it’s part of the DNA of much of the population. And it produces some classic reactions. Read... Nationalizing Companies Is Part Of The French DNA

And here is another government-company saga: the folks at Gazprom, majority-owned by the Russian government, are reveling in the mockery that has been made of a Ukraine-Spain gas deal that would have loosened Russia’s stranglehold on Kiev. But this is what happens when you mess with Gazprom. Read....  Ukraine Crushed in $1.1bn Fake Gas Deal.

 

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Fri, 11/30/2012 - 15:31 | 3024560 steve from virginia
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Inch-by-inches the de-industrialization of the world continues. The vulnerable enterprises have gone or are going: merchants in Greece, then Spain and Portugal, auto manufacturers in Italy and France ... and the US, then manufacturers in Japan ... then basic industries and construction in China, eventually the Koreans' factories will close and the Germans: there are no customers, there is no more credit, the factories do not pay for themselves and never have. Without more credit they are simply gone ... with the wind.

 

The Soviets had a different idea, they made an economy of submarines, 'dynamos' and T-62 tanks but this idea only lasted for a little while. Now the bell rings for the capitalist, debt-based economy. Industrialization is a passing fancy ... like clipper ships.

 

... and the industrial world turns into Detroit, the great cities become ashes and ruin then are washed away ... the humans scatter into the countryside to forage for what remains then they perish ... like the great mammoths and saber-tooth lions that the humans once hunted during the dawn of mankind hundreds-of-thousands of years ago.

 

The question is not whether we will make more mistakes as we 'fake evolve' but whether we can survive these mistakes. Right now it doesn't look good.

 

 

Fri, 11/30/2012 - 15:16 | 3024465 Bastiat009
Bastiat009's picture

I didn't read past " Industry Minister Arnaud Montebourg" ... he is not Industry Minister.

Fri, 11/30/2012 - 14:46 | 3024358 THE DORK OF CORK
THE DORK OF CORK's picture

@Snake eyes

If you read your len deighton you will find the RAF also lost much of its pre war trained pilots over France that year.

The french had a modern fighter but must of their forces were protecting industrial rather then battlefield areas as they expected a "long war" like the last time.

The only French tank commander to give them a bit of a shock was De Gaulle of course.

 

http://en.wikipedia.org/wiki/Dewoitine_D.520

 

Fri, 11/30/2012 - 14:34 | 3024323 Joebloinvestor
Joebloinvestor's picture

France will be the next Greece, but the French will never admit it till it is too fucking late.

Unlike the Greeks, they have some industry, but a worse political agenda (almost).

Fri, 11/30/2012 - 13:59 | 3024146 THE DORK OF CORK
THE DORK OF CORK's picture

 

Irish 2011 transport omnibus was published.

http://www.cso.ie/en/media/csoie/releasespublications/documents/transport/2011/transport11.pdf

The highlight of course continues to be the massive collapse of road freight (biggest fall in Europe by a wide margin)
Y2007 Tonnes carried (thousand) : 299 ,307
Y2011 Tonnes carried (thousand) : 110 ,260

A older transport omnibus gives road freight as 314,826 in 2007 ?

In that 2007 publication 159,865 was road and building site work
In 2011 30,981

However all activities are down hugely ( delivery of goods to retail , wholesale , factories , households ,other work , import /export……..everything.
Including even farms (livestock , farm produce ,fertilizer )

The older 2007 publication
http://www.cso.ie/en/media/csoie/releasespublications/documents/transport/2007/transport07.pdf

LUAS Dublin tram seems to be the only bright spot recovering past 2007 passenger levels (although it is a much bigger rail network now )
With a 5.1% increase over Y2010 passengers ,now standing at 16.5 million & 12.5 million for the red & green lines.
Whats really a great worry is the decline of Dublin and other areas bus fleets , this after a 20 % ~ drop in countrywide passengers since 2007
In 2007 Dublin bus fleet was 1,145 vehicles
In 2011 Dublin bus fleet was 940 vehicles
In 2007 Cork city bus fleet was 87 vehicles
In 2011 Cork city bus fleet was 78 vehicles.

Mainline domestic (Inter city rail ?) passenger numbers seem to have recovered back to their 2007 levels as they now poach the retired domestic air routes but they face stiff competition from a more liberalized (low wage) inter city Bus service that now use the almost empty new motorway network.
Y2007 (thousand pas.) :10,537
Y2011 :10,656

However Dublin suburb & DART passenger numbers have collapsed
Y2007 Suburb :13,180
Y2011 :9,911

Dart
Y2007 :20,224
Y2011 : 15,924

However as can be seen across the border these rail declines are almost entirely caused by monetary malice as resource inputs are minimal when trains are full.

(NIR continue to report record passenger numbers)


Air passenger numbers were more or less static over this time although almost all regional airports continue to decline.

 

Fri, 11/30/2012 - 13:47 | 3024140 dexter_morgan
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FORWARD!

Fri, 11/30/2012 - 13:13 | 3024051 Offthebeach
Offthebeach's picture

Large coke hauling subs?

That would crash the Mexicans and the domestic Meth market.

Maybe if you fill them up with Oxycontin. That wouldn't too much impact the communities that depend upon profitable new industry.

I suggest buying from domestic big pharmacy, export for face saving, then smuggle in. Thus big pharm will run interference, politically, for you.

Fri, 11/30/2012 - 12:21 | 3023825 Vashta Nerada
Vashta Nerada's picture

Arcelor-Mittal should move out of France.  That would give Hollande 20,000 more welfare votes, and cut A-M's COGS.  Win-win.

Fri, 11/30/2012 - 11:20 | 3023614 NEOSERF
NEOSERF's picture

Perhaps Hollande can create a new government agency...the Rainbow Gold Chasers or RGC...would be like those storm chasers except they would have shovels and quickly dig up the gold at the end of the rainbow.  Couple of big hits and Le Deficit would be solved.

Fri, 11/30/2012 - 11:17 | 3023600 NEOSERF
NEOSERF's picture

Reinforces the Citi Buiter note on the rise of the US and China and the sclerotic death of Europe...with this kind of political strategery, the remaining business and elite in Europe will quicken their pace to the New World, even with all our issues..

Fri, 11/30/2012 - 11:11 | 3023579 lakecity55
lakecity55's picture

So.. the secret of O'Twinkie thathe has spent millions of fiats to hide is that he is.....French?

 

Oh, my.

Fri, 11/30/2012 - 10:29 | 3023423 DonutBoy
DonutBoy's picture

"It's a very good sign to send out (to investors). Nationalizing is a very modern step to take. Especially when you not only nationalize losses but profits as well, when you make public/private partnerships. This is our strategy."

“The strategy we're putting forward is extremely modern and adapted to the current times of crisis. It's a way of making the economy work in the interests of industry, more than just helping the financial sector,” he added.

Attributed to French Industry Minister Arnaud Montebourg, actually from Wesley Mouch

Fri, 11/30/2012 - 10:01 | 3023340 IamtheREALmario
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So what happens when there are no free markets left? Were there ever any really free markets? ... yeah probably when governments were at their weakest and princes were frogs.

Fri, 11/30/2012 - 12:48 | 3023958 nowhereman
nowhereman's picture

Free Markets?   Bwahahahaha.  Now there's a myth for you.

Fri, 11/30/2012 - 09:33 | 3023265 Hannibal
Hannibal's picture

Nationalise, Bail Outs, Socialise, Subsidise, same shit different labels.

Fri, 11/30/2012 - 09:12 | 3023194 earnulf
earnulf's picture

So the workers want to build, but the products they produce are not wanted.   But if government takes over, then government can employ them to make products that are not wanted.   BRILLIANT!

And since the government is already a third owner of the company, it only takes about 18% to nationalize or half of what they already own.   Surely they could finance that, or rehypothicate that.  BRILLIANT!

Maybe what are needed are cargo submarines that could be sold to the drug lords in South America, I understand there is a booming market for those at the moment.   BRILLIANT!

Fri, 11/30/2012 - 08:56 | 3023170 lamont cranston
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The logical outcome of this is that we all stay home, sit on our asses, and get paid. Also, free gas, food, absolve my mortgage, etc. Uncle Sammy better also pay my electric bill, property tax AND my bar tab, dammit

Just print it, baby. 

Yeah, sure. With no inflation. We know how this scenario turns out.

Fri, 11/30/2012 - 12:52 | 3023977 nowhereman
nowhereman's picture

They're already doing that for their cronies, why not for the rest of us?  Now there's a novel idea.

 

(they're, their, there, sweet)

Fri, 11/30/2012 - 08:10 | 3023123 shovelhead
shovelhead's picture

Instead of creating a boondoggle of lost money by nationalizing the shipyards, the govt. could turn that prime oceanfront property into lovely expensive vacation condos.

What? Wait a ...  Never mind.

Fri, 11/30/2012 - 07:50 | 3023100 egoist
egoist's picture

Ownership of shipyard... funny phrase.

 

It's a damned shame that with most of the world turning statist, there's not some wise-guy country that's turning toward freedom to mop up the industrial void. Some place like the USA would be ideal, back in the day.

Fri, 11/30/2012 - 10:47 | 3023495 masterinchancery
masterinchancery's picture

Chile, singapore, HK.

Fri, 11/30/2012 - 06:54 | 3023049 THE DORK OF CORK
THE DORK OF CORK's picture

Anything but nationalize the money supply.

ANYTHING.

 

The advantage of French statism is that it has peserved (albeit a rump workforce) that can be used in a event of reversal of world trade and capital flows.

The UK not so much.

Its a free trading nation without a Navy.....................

 

Printing Francs will give them work.

 

 

Fri, 11/30/2012 - 05:46 | 3023004 Haus-Targaryen
Haus-Targaryen's picture

I understand why the French feel a need to do this; they are so uncompetative at this point that if what little remains of private industry leaves -- it will likely never return.  There are Italian and German ship builders a plenty that would love to get their hands on skilled labor for the cheap.  

Fri, 11/30/2012 - 06:49 | 3023045 The Reich
The Reich's picture

Unfortunately, there are not that many shipyards left in Western Yrope.

Fri, 11/30/2012 - 05:29 | 3022991 falak pema
falak pema's picture

the issue today is what return on capital does the oligarchy construct propose to the first world in this casino economy?

The answer is zilch! And the price is depression and dismembering of the first world economy and its work force; or hyperinflation, which leads to the same end.

So if the verticality of capital accumulation has no useful solution for the use of its offshored capital; the Mittal conglomerate is just one example, now in desperate attrition and layoffs as commodity prices risk to fall in a hi-energy, lo-growth environment; then the state has to step in to stop the rot.

If this current fiat bubble leads to the explosion of the whole banking system in first world; as it could; the state will have to step in to clean up that huge mess alike the Augean stables of old. That is the current sword of Damocles, WMD of financial fiat, these Oligarchs hold over our heads. But it cannot hide the demise of their own role as leaders of productive capital.

They are the disease now, not the solution. It will lead to much mayhem unless we find the philosopher's stone.

It ain't in the Casino economy; maybe on the holographic moon! Dream on! 

The current trajectory of the Oligarchs and their friends in power is the following:

"We got into this mess due to a generation of hubris and malinvestment. We need a generational sacrifice to get us out.

So lets kick the can. Tuff on this young generation but that's the best we can do!

Let the pendulum swing and close down the hatches in the meantime! "...

Will the people buy this solution all at their expense? 

Your guess as good as mine; but the Oligarchy message is all too clear : Our domino falls last! 

Fri, 11/30/2012 - 08:11 | 3023126 Ewtman
Ewtman's picture

"So lets kick the can. Tuff on this young generation but that's the best we can do!"

Nowhere is it written that the younger generation MUST pay for the sins of their fathers. Default is an ugly but all too practical an option once the can becomes too mutilated to efficiently kick anymore.

Fri, 11/30/2012 - 04:21 | 3022959 Gmpx
Gmpx's picture

Nationalisation is the only option for important operations when business people are not insterested. For example, NASA is not a commercial operation.

Fri, 11/30/2012 - 03:58 | 3022953 Ghordius
Ghordius's picture

Nationalizing, as distasteful as it is, is still somewhat more honest than bailing out with taxpayer's money with nearly no strings attached. For us.
+1 autonomos

Fri, 11/30/2012 - 14:09 | 3024215 ebworthen
ebworthen's picture

The U.S. government has essentially nationalized G.M. and Chrysler, along with A.I.G.; not to mention mortgage lenders via FHA and Fannie/Freddie.

J.P Morgan Chase and Wells Fargo running EBT (SNAP/Food Stamp) programs as well as unemployment accounts propped by U.S. Government - a shadow nationalization scheme.

Obamacare will further the nationalization, as the insurance is mandatory yet private corporations will be able to run the insurance programs, collect premiums, run commercials, etc.

The U.S. Economy itself has been nationalized with FED QEinfinity and government spending; without it the economy would collapse.  It would recover eventually but corporate failure has been socialized, thus the nationalization of the economy.

Fri, 11/30/2012 - 08:41 | 3023158 Non Passaran
Non Passaran's picture

It's just as bad.

Fri, 11/30/2012 - 05:45 | 3023002 Haus-Targaryen
Haus-Targaryen's picture

So you're French .... let me guess, no fan of Le Front and Marie le Pan? 

Fri, 11/30/2012 - 07:14 | 3023062 Ghordius
Ghordius's picture

me? a "damn frog"? ;-)

not much, not really, but I do love France. Are you a fan of Marine?

to elaborate what I meant: in continental european countries there is much, much less stigma associated to nationalizations as in (generally more liberal) AngloAmerican countries

this applies very strongly to France, Germany, Austria, Italy, Spain and Portugal, all historic "master-nationalizers" in times of crisis

so while an American might recoil in horror at the word itself, we are more relaxed with it and might ask more "why?" then immediately riot

several continental nations have also an industry policy keen on preserving "key industries", which are regularly discussed in parliament

as the article itself says, France regards part of this shipbuilding industry and it's associated steel production as "key" and do not want to "lose the skillset"

this is matter of policy, as I wrote, and of course debatable, as the whole concept of "national asset"

-------

an example from real life: Dubya experienced something opposite to this when he came back from Taiwan with orders for diesel-electric submarines

GE and the others had to tell him: "Mr. President, we have lost the necessary skill-set to produce small, defensive diesel-electric subs, we do only big nuclear, and we would have to invest lots of money and time to reacquire this specific skill set"

now this spate, as Urban Redneck writes, is seriously debatable

nevertheless this article is from Wolfie, and he seriously loves to use loaded words to somehow paint the continentals as illiberal ogres to his AngloAmerican audience

so: it's not that loaded for us (continental europeans)

Fri, 11/30/2012 - 09:47 | 3023314 carambar
carambar's picture

In the US we do not nationalize, we massively subsidise, raise import duties or manipulate our currency.

I find hillarious the current complaint against China being a currency manipulator. The student surpassed his teacher.

 

Fri, 11/30/2012 - 08:46 | 3023162 Urban Redneck
Urban Redneck's picture

I'm all for loaded words, to a point at which even crass Americans could cringe at my diction- I've seen too many "civilized" and otherwise rational and reasoned persons fold like cheap lawn chairs behind closed doors when the gloves come off and the sausage gets made...

The people at the top of the pyramid aren't stupid, and they don't actually play "nice", even if they appear to do so when on TV. 

Fri, 11/30/2012 - 09:03 | 3023180 Ghordius
Ghordius's picture

LOL, pls disagree with me so that we can exchange some loaded words?

OT, I reccomend this piece from Jesse about Iceland

http://jessescrossroadscafe.blogspot.ch/2012/11/how-iceland-restrained-a...

Fri, 11/30/2012 - 09:44 | 3023301 Urban Redneck
Urban Redneck's picture

I'm sure we could come to a rather vociferous disagreement on the wisdom of the choices of "key industries" but I have a meeting on the other side of town this afternoon, so perhaps this weekend, since we are in an endless Groundhog Day replay of same shit, different day-

Fri, 11/30/2012 - 12:19 | 3023816 Ghordius
Ghordius's picture

damn, I don't think we'll find much disagreement there

Fri, 11/30/2012 - 06:38 | 3023034 falak pema
falak pema's picture

can you tell bordeaux from burgundy and Le Pen from le Pan?

Competitivity is not a thing that just works on the private/public divide per se. Sometimes the dynamics of the private sector can make it LESS competitive than the public; just saying. It sounds crazy, but it can happen for short periods of time; like today in ALL of first world. We were there in 2008 in the USA, when the government virtually nationalised all the banks and GM; temporarily. 

Fri, 11/30/2012 - 06:46 | 3023037 Haus-Targaryen
Haus-Targaryen's picture

I speak not a word of French, nor do I really care to.  

 

The US should have let GM fail, as well as the banks.  There were enough smaller financial institutions to feast upon the carcases and keep the thing afloat.  

Fri, 11/30/2012 - 11:29 | 3023578 homonohumanus
homonohumanus's picture

Well I wonder, I'm not sure that people measure the consequences of such a decision.

 

That might have triggered a change in the power equilibrium with Occident (Nato countries mostly) possibly loosing their supremacy. The reason why be it US or EU can print to this extend, is that the petrodollars still stands, thanks to mostly US thalassocratic efforts.

 

So what would have have happen is unknown but the scale could have been enormous, though I'm sure at least 5 billions people would have embrassed the change happily.

 

The issue is imo that nothing serious was asked in exchange to those bailouts, neither the lacking(s) of the system were exposed in all their complexity to the masses. There is still a lot of misunderstanding, US citizens for example want to pay less or more appropriately do not want to pay for what they have, sustain a thalassocracy is costly in many regards (there is a heavy counter part to military, the veteran pensions and that is a lot of money long term).

 

I think that Americans are willing forgiving to the Empire they are running, they don't want to see it even less acknoledge it, that is pretty much why I think a Romney, Paul ticket would have failed to a greater extend than what we have.

Fri, 11/30/2012 - 08:37 | 3023152 Ewtman
Ewtman's picture

No doubt you are correct. With eyes cast on the horizon rather than the undulations of every recent wave of concern, it is evident that Darwin will eventually win out. Markets that form parabolic curves are bubbles and always collapse catastrophically.

The DOW was at 572 in 1975, just 190 points above the 1929 high. By 2007 it was at 14198. It blew up by a factor of 28 in barely a quarter century. That's a bubble and it was fueled (and continues to be fueled) by debt. We should not be propping up the purveyors of more debt but rather (as Haus-Targaryen recognizes) we need to drag them down by their hindquarters for all to feast upon them. They have become old and slow and they will endanger the herd if it tries to protect them much longer. Their demise is the future solution... not their salvation.

The argument over nationalization is a red herring.

Fri, 11/30/2012 - 07:30 | 3023078 falak pema
falak pema's picture

Moot point, that's the line defended by ZH.

But ALL of capitalist America and also capitalist Europe and ROW (BRICS/Arabs included), thought otherwise.

So its debatable if the major banks and major industries tied into them, (as we now know the GS piloted industrial/banksta network built during deregulation age is truly global), had gone belly up, what the TRUE fall-out would have meant. It would have certainly spelt the demise of current Oligarchy America.

Unchartered territory, like 1929...It was avoided, but the fall out is now ominous, as these Oligarchs are hell bent to hold power come what may.

Time to eat humble pie, and not speak in terms of certitudes as this corrupt construct will hit the wall one day. So when that happens you'll be happy to have a government who NOT only nationalises industry but also the MONEY line; source of current world wide evil. To rebuild capitalism on new foundations. 

Unless you know how to make a populist/capitalist, libertarian revolution occur, like saying "hey presto!" in the USA.

Out of thin air! 

Fri, 11/30/2012 - 03:41 | 3022945 autonomos
autonomos's picture

we nationalize, you bail out

Fri, 11/30/2012 - 05:24 | 3022987 Urban Redneck
Urban Redneck's picture

Banks and industrial concerns are different beasts.  Nationalizing an industrial concern which doesn't have any paying customers, just to give no-work paychecks drawn on the taxpayer is just as ineffective a fix as a State handout to a bank.

The prime international banks need to be nationalized and their derivatives actually need to be netted and the shareholder equity adjusted "appropriately" - but that is a far cry from the French expropriating a Korean investment because the there is no demand for what the French are offering (other than handouts for voters).

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