9 JUNE 2001, Page 14


The new TGV link to the Med is jolly

impressive, says Jo Johnson, but France

cannot really afford such glory

Paris THE new TGV will run from sea to shining sea, linking the oil-swept Channel coast to the Bergasol-soaked beaches of the Mediterranean. The opening on Sunday of the Mediterranean leg of France's high-speed rail network will bring Marseilles within three hours of Paris, and train-envy to the commuters and transport ministries of Europe. An engineering triumph to rival Japan's bullet train, this 300kph lightning bolt of steel and glass will redound to the gloire of France as much as would any World Cup win or nuking of an unsuspecting atoll.

Downtrodden British commuters cannot hear the heart-rending statistics too often. France has one of the densest transport networks on the planet, with 146 kilometres of road and 6 kilometres of railway per 100 square kilometres. For just 62 francs (£39) Parisians will be able to swan down to the CA5te d'Azur in three hours, knocking an hour and a quarter off the old journey. Waterloo-Marseilles will take six hours, two fewer than the trip to Inverness, which is less than two-thirds the distance but costs more than twice the price. If British trains went as fast, they would do Paddington-Oxford in 16 minutes, and King's Cross-Inverness in under three hours, rather than eight.

But such seemingly shameful comparisons do not tell the full story. Rai1track and the dastardly crew of UK train operators may hardly be a model of the efficient modern transport system. They may even be perpetrators of a world-class farce. But the French system is far from being without its faults. Some are obvious, indeed familiar. A train drivers' strike paralysed France this spring. The network in the Ile de France looks lethal. Traffic outstrips capacity. Rolling-stock is overdue for renewal. The violent assaults and gang rapes that characterise life in the Parisian suburbs often spill on to tracks and trains.

But the worst faults lurk beneath the surface. Few private transport companies can compete with a state-owned entity happily haemorrhaging public money. Ask the private airline AOM-Air Liberte, part-owned by Swissair. It is being run out of town by the new TGV Med at a probable cost of 7,500 jobs, leaving partly privatised Air France a clear field as an almighty monopolist on domestic flights. Above all, the system is mammothly loss-making. The losses partly reflect the scale of the network. France might be just four-fifths the size of Texas, but it is the largest and most sparsely populated country in Western Europe, covering almost a fifth of the European Union.

Plastering this huge expanse with 32,000 kilometres of high-tech railways landed the public network owner. the Reseau Ferre de France, with nearly 30 billion francs of debt in 1999, making it one of the most heavily indebted corporate entities in the world. It is bleeding heavily, losing 1.6 billion francs in 1999, despite a 1.5 billion francs government subsidy. As for the SNCF, which operates the trains, launching the Med link will push it into the red again this year with an expected 162 million francs loss to add to its own 6.5 billion francs debt burden.

All in, then, the taxpayer is sitting on about 37 billion francs of rail-related debt and taking on the chin annual losses of almost 3.3 billion francs. Hardly peanuts, even for Europe's biggest-spending state. And that is why the TGV Med will mark the high-water mark of gargantuan government spending. Even if big government survives for a while yet, the completion of the TGV network across the length and breadth of the country is the last of Mitterrand's grands travaux — after the Opera Bastille, the new National Library and the Defense business complex — to come home to roost at the taxpayers' expense.

As consumers of cheap and good rail services, the French may be getting value for money. But as taxpayers and owners of businesses that challenge the might of stateowned Air France and the SNCF, they are thoroughly gouged for that privilege. After all, the French state consumes 53 per cent of GDP, the highest share of any G7 nation. Top tax-rates of 53 per cent kick in at just under £30,000. On top of this there are eye-watering social-security charges and a stinging wealth tax on assets for the affluent. France is a rich country where people feel poor.

But it is liberalising, albeit slowly and with many false steps. Twenty years on from Mitterrand's nationalising sweep into power, it is finally adapting to the rules of a global economy where capital and businesses are hyper-mobile and can avoid l'exception francaise. Under pressure from business and Brussels, the Jospin government has overseen more privatisations, including Air France and France Telecom, than its Gaullist predecessor. And under finance minister Laurent Fabius tax-rates will fall, symbolically taking the state's share of GDP to under 50 per cent in 2004.

While the French revel in their excellent public services, many have never had less trust in their public servants. Massive corruption among a governing elite, whose maxim is that every decision made by the market leaves one fewer to be taken by an enarque (a graduate of the Ecole Nationale d'Administration, training ground for France's most ambitious swots) has also diminished popular support for the high-tax society.

Last week's six-month prison sentence for Roland Dumas, a former foreign minister and head of France's constitutional court, for his colourful contribution to the many-tentacled Elf affair is just the latest in a long line of scandals that have served to distance the elite planners, taxers and spenders from the general public. Even President Chirac is fighting to preserve his immunity from prosecution. Vivid evidence of the popular discontent with the state appeared in 'local elections: voter turnout hit its lowest levels in the history of the Fifth Republic; an active abstention movement backed by a rock group won more than 12 per cent of the vote in Toulouse.

But if they are not voting at the polls, many Frenchmen and women are doing so with their feet. Some 1.8 million French now choose to live abroad. When they can, French businesses invest overseas rather than at home. Backward steps, such as the 35-hour week and rushed laws making it harder for companies to lay off workers, increase the cost of doing business in France.

However, the trend is unmistakable. For all M. Jospin's rhetoric about a 'social Europe' and his condemnation of pernicious international tax competition, the pace of reform in France is quickening. Many in France even desire Britain's rapid entry into the eurozone not just as an additional buttress against German dominance, but as a supportive force for the structural reform that a global economy demands. The game may be up for gargantuan government, but at least the TGV to the Med is in place. Vive l'exception francaise —while it lasts.

Jo Johnson is Paris correspondent for the Financial Times.