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May 2, 2012 5:02 pm
Just outside Perrache railway station in central Lyon, France’s second biggest city, planners are busy converting two derelict 19th-century prisons into an apartment complex and campus for the local Catholic university.
“This project won the day because of the attention paid to respecting the national heritage,” says Gilles Bayon de la Tour, the developer whose company, Ogic, is overseeing the renovation. “The essential characteristics of 19th-century prison architecture will be preserved.”
It is the kind of project of which France is likely to see many more over the next five years, no matter whether Nicolas Sarkozy, the centre-right incumbent, or François Hollande, the Socialist challenger, wins Sunday’s presidential election.
With financial markets keeping a close eye on the relentless rise in France’s public debt towards 90 per cent of gross domestic product, the French state has every incentive to sell off properties and put the proceeds towards its wider objective of fiscal stability.
Italy, Portugal, Greece and other European Union countries are following a similar path, though few if any can match France – which, geographically, is the largest EU country – when it comes to the value and variety of properties potentially up for sale.
The prisons in Lyon were owned by the French justice ministry, which sold them for €25m about 18 months ago. Another venerable, Paris-based government arm that is actively looking to part with unwanted property is the defence ministry.
But the register of state property owners extends well beyond central government. It includes public entities such as the SNCF railway company and La Poste, the postal services and bank group. Both are supposed to operate these days on more commercial principles.
All told, the French state sold about €590m worth of properties in 2011, more than €500m in 2010 and €475m in 2009, according to the budget ministry. The combined value of sales for this year, next year and 2014 should be about €2.2bn, it predicts.
To sell assets such as prisons or, as in the city of Dijon, a former military hospital, is to kill two birds with one stone. The state receives much-needed revenue, and the properties can be redeveloped into residential zones to ease France’s shortage of affordable urban housing.
It is revealing that, whatever their ideological differences, Mr Sarkozy and Mr Hollande each sees about 100,000 housing units being built over the five-year presidential term.
The instinct of Mr Sarkozy’s government is to sell state property at market prices and allow developers to convert them into a mix of private and public housing, whereas Mr Hollande’s advisers say they prefer an exclusive emphasis on public housing. However, the broader point – that one of the simplest methods of addressing the housing shortage is to dispose of state property – remains common to both camps.
Some economists contend that the unspoken consensus on property sales illustrates how the policy proposals of the candidates can overlap in surprising ways. This, in turn, indicates how little room for manoeuvre the winning candidate, whether of the left or the right, will enjoy in terms of fiscal policy.
“The French economy needs reforms and a reversal of some less positive trends. France is currently in a situation of twin current account and budget deficits which could, in the longer term, seriously impact the credibility of French public finances,” says Manuel Maleki, economist at ING bank in Brussels.
The economic programmes of Mr Sarkozy and Mr Hollande rest on promises of medium-term fiscal consolidation that are remarkably similar, relying as they do on eliminating tax loopholes as well as imposing higher taxes on big companies in return for incentives for small and medium-sized firms.
Neither candidate has chosen to go into much detail about how government expenditure, especially social spending, will be cut back.
Mr Hollande has sought to cast himself as somewhat less fixated than his opponent on the need for fiscal rigour by proposing to wait until 2017, rather than 2016, to bring the budget into balance.
But the reality is that the balanced budget projections of both sides lie far in the future. This offers ample scope for the next president and his government to claim, at some point in the next couple of years, that unforeseen events have made it necessary to revise their forecasts.
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