European leaders have yet to find convincing answers to the global energy crisis. The concerted effort of the past decade to connect swaths of the continent to Kremlin oil and gas pipelines has come back to haunt it dramatically.
As Vladimir Putin threatens to cut off supplies at any moment, European politicians are in a state of panic, seeking alternative sources to avoid widespread blackouts, the collapse of industry and manufacturing, energy poverty widespread and a severe recession.
Things should have been different in France. With 70% of its electricity coming from nuclear, it is much less dependent on Russian gas than neighboring Germany.
Yet the French energy system is in disarray, and Emmanuel Macron’s solution is arguably the worst of the lot, in a decidedly congested field – a thoughtless and impulsive populist response from a president grappling with a massive political crisis at home. .
Macron may have formed a new centrist alliance, but you would think he would be better advised to have spent three years as a rainmaker in mergers and acquisitions and embarked on the restructuring of the debt of the prestigious Rothschild investment bank before entering politics.
It certainly does nothing for Marine Le Pen’s repeated attempts to discredit him as a “candidate of finance” in the decisive second round of the recent French elections.
Faced with long delays and huge budget overruns on new nuclear plants at home and abroad, corrosion problems in many of its existing reactors, and the same spiraling cost of living that has seized most of Europe, Macron decided that the time had come to renationalise EDF, the heavily indebted electricity titan.
You can see the attractions, limited as they are. As the largest utility in the country by a sizeable margin, EDF has become the face of France’s energy crisis. Taking EDF into state hands removes it from the glamor of the stock market, making it, in theory, easier for it to tackle its massive financial and operational problems head-on with the approval of the private shareholders which is no longer required.
Elisabeth Borne, the Prime Minister, also spoke of the need “to ensure our sovereignty” in the face of Russia’s invasion of Ukraine, while Macron wants massive investments in new nuclear reactors as a pillar of the will to France’s carbon neutrality.
Nonetheless, despite all the political hype, it’s a decision I’m willing to bet will almost certainly backfire – and dramatically too. Whatever the problem, nationalization is rarely, if ever, the solution. History has taught us that.
Even Sir Keir Starmer has repeatedly ruled out handing over Britain’s ‘big six’ suppliers to the state, in a major rebuff to shadow climate secretary Ed Miliband, who has argued for common ownership to speed up the transition from the economy to net zero.
The only real benefit there could be is that EDF’s borrowing costs could come down, analysts point out. But that won’t magically solve his mountain of debt. In fact, if Macron gets his way, the company’s balance sheet will be stretched to astronomical new proportions. The French president wants to build at least six next-generation nuclear bombs, but has not revealed where the 50bn euros (£42bn) of required investment will come from – no private investors, it seems -he.
Ratings agency S&P predicts debt levels could rise by 17 billion euros to more than 90 billion euros next year, due to severe negative cash flows caused by new punitive regulatory measures , and that doesn’t even take into account the costs of Macron’s grand projects.