by Agnes a Paris
Wed Dec 6th, 2006 at 04:40:52 PM EST
A follow-up on my yesterday's diary. True, investment bankers and equity funds can be blamed but none of them ever pretended to be entrusted with caring for the general good. Last century, a wide-spread opinion had it that governments were in charge.
There was a time when the honour of that mission had been bestowed upon governments. Governments, on a federal or local level, would run hospitals, ensure people can safely drive from one place to another (without even having to pay for that, what a preposterous idea...), provide a quality of services on airport and railway stations sites. Mission de service public we call in France. Services meeting fundamental needs were not to be handed over to a private party, period.
These times are gone for good, at least in the so-called civilized world. In some countries, far east, the quality of assets is so poor that no private investor will lay money on the table, but only that is hindering governments from divesting.
Hard core divestment, this is. Last year, the French government fast-tracked with so far seldom experienced speed its stake in toll road motorway operators. The fact that one of the local construction companies, Eiffage, had to tap the debt markets despite an already high leverage to be able to team up on a decent basis with Australia's Macquarie did not seem to alarm anybody. Some banks were annoyed not to be able to participate in the acquisition financing of the APRR (Autoroutes Paris Rhin Rhone) toll road operator, conducted through a vehicle jointly owned by eiffage and Macquarie, because they had already lent Eiffage too much on a corporate basis and they had capital adequacy constraints. A shame, these prudential ratios by the way. <s>
In unauthorised circles, general consensus had it that the French government would have gotten themselves a much better deal (ie the assets sold were allegedly worth more) had they not pushed for the acquisitions to close before budget year-end.
So, okay, banks and private equity investors are voracious and wicked. But all they do is graciously accept to take on their balance sheet the assets governments are dumping in a desperate need for quickly available cash. On the other end, the same governments find only natural that generations of "end-users" to come bear the brunt of today's hospitals, schools and prisons built and financed under PPP schemes.
Etat-providence is dead, long live the greedy markets. Still, in the case of formerly public owned assets, it is questionable whether and to what extent the free forces of the market should have been let in.
What's you opinion ?