Abu Dhabi, UAESunday 15 December 2019

In Europe, big visions are out, big corporations are in

The recent merger between French and German railway giants shows that the bloc is trying to stay ahead of China in the race to retain what is left of the continent's superiority

Alstom and Siemens, which make France's high-speed TGV and Germany's ICE trains, announced a tie-up to create a new European rail champion. Jacques Demarthon / AFP
Alstom and Siemens, which make France's high-speed TGV and Germany's ICE trains, announced a tie-up to create a new European rail champion. Jacques Demarthon / AFP

For months, the German elections have been seen as a bump in the road which, once passed, would drive out Europe’s listless mood, allowing the youthful president of France, Emmanuel Macron, to revive the lost spirit of integration.

The election has, in fact, turned out to be more of an Alp than a bump. On Sunday, Angela Merkel was re-elected as chancellor for a fourth term, but with a reduced majority and more than 80 members of the Eurosceptic, anti-immigrant Alternative for Germany party in parliament.

She will be busy coalition-building for at least two months and no doubt inward-looking rather than engaged in grand plans.

Mr Macron is fully aware of the hike that Mrs Merkel has to undertake to re-establish herself. But he appears undaunted.

On Tuesday, he gave a 100-minute speech at the Sorbonne University in Paris to set out his vision for a rejuvenated Europe.

Reporters counted no fewer than 23 items on his wish list. The speech was so long that some TV news channels gave up on the live broadcast before the end.

At a time when speakers are told that an audience can remember no more than two things from a speech, this was certainly an act of defiance. Cynics saw the breadth of his vision as a way to hide the fact that what he really wants to achieve – a radically deeper integration of economies that use the euro – has become all but impossible under the likely coalition that Mrs Merkel will have to put together.


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He did say one very resonant phrase, however, and that is that "the sea walls behind which Europe has thrived have gone".

The only way forward, he said, was through a “sovereign” Europe, which sounds like a super-state. But what did he mean?

An answer came the next day with the announcement that the two leading European makers of high-speed trains, Siemens of Germany and Alstom of France, were to merge to create a “new European champion” in the rail industry.

This is no minor development. The two companies have been in fierce competition but now accept that the continent is not big enough for the two rival firms. They have to join forces against what Siemens boss Joe Kaeser called a “dominant player in Asia”, a reference to the Chinese giant of high-speed rail, CRRC Corporation.

Officially, the merged company will have equal partnership between Siemens and Alstom and will be based in the Paris region.

In France, however, it is seen as the likely demise of a great industrial champion, a pioneer of the original high-speed TGV train, which has been nurtured and defended by the French state for decades.

Alstom was rescued from bankruptcy by the state in 2004. Last year, the government spent €500 million (Dh2.2 billion) ordering high-speed trains that the railways did not need to prevent a historic factory closing down.

Mr Macron, a former investment banker, has had enough of wasteful national champions and sees the logic of consolidation. By having the French state step aside and allowing the merger, he had ditched decades of industrial policy – or centuries, if you go back to the time of Louis XIV.

For him, this is a down payment on his vision of a sovereign Europe. Unsurprisingly, others see a more parochial issue. Eric Woerth, a former French labour minister, asked: “will the TGV now be German?”, a sentiment echoed in newspapers and social media.

In commercial terms, the logic for creating one European champion is clear. China’s CRRC is said to be able to outspend the Europeans by a factor of seven on research and development. A country where you could still see working steam trains in the 1980s now has the world’s largest network of high-speed rail, capable of producing rolling stock faster and more cheaply than Germany and Japan.

Its experience in building railways through China’s different climates and landscapes makes it well-prepared to carry out the government’s Belt and Road initiative to turn the byways of Central Asia, where Bactrian camels used to tread, into high-speed corridors.

If it comes to fruition, the project will link up Central and South Asia to the Middle East and then all the way to Europe. With much of the high-speed network in China already built, CRRC needs export markets to soak up its spare capacity.


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This is not the first European champion. In the 1960s, European aerospace companies banded together to create Airbus to challenge the dominant US corporations. But at its origin, Airbus was a government-led project with France at its heart.

Today’s national champions are commercial and the logic of the market may slowly throttle the Alstom component.

This is what Mr Macron means when he says “the sea walls behind which Europe has thrived have gone”. At some cost to his domestic popularity, he is showing how he sees the future of Europe.

And what about Germany? Mrs Merkel will first need to settle anxieties in her own party over its poor showing. German taxpayers are not keen on Mr Macron’s vision of eurozone integration if it means they are on the hook to bail out less successful countries. Her presumed coalition partners, the Free Democrats, are adamant that any eurozone budget will be symbolic rather than a game-changer.

The chancellor will need to keep the increasingly Eurosceptic governments in Poland and Hungary aligned with the European project, while managing Italy and Spain, the first weakened by rising populism and the second by Catalan separatism.

The problem with European politics is that everywhere, mainstream parties have been weakened by insurgents – now in Germany, which was previously thought immune to the contagion, and, of course, in France, where Mr Macron is, himself, an insurgent. This is a difficult time for politicians to have visions. Maybe it is only the big corporations who can – and indeed must – scan the horizon.

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Updated: September 28, 2017 02:53 PM