Monday, November 26, 2012

Mittal-Hollande Summit

Arnaud Montebourg, who has made a specialty of undiplomatic and unproductive pronouncements, accused Lakshmi Mittal of reneging on commitments made to France, precipitating a crisis. Mittal is on his way to France to thrash the matter out with President Hollande. Now, it is true that Mittal has closed certain operations in Gandrange and Florange that he had promised some years ago to keep running and even beef up with new investments, but his promises were contingent on certain economic conditions, which have not been met. European steel consumption has declined sharply in the crisis, and this may or may not justify Mittal's decisions, depending on the precise nature of the understanding he had with Sarkozy.

Beyond the narrow issue, however, is Montebourg's apparent general view that virtually nothing can justify a plant closure. At a time when the government is emphasizing the need for pro-competitiveness measures, such a position seems short-sighted. I won't pronounce on the economics of the steel industry or the proper way to address overcapacity in steel production. There are complex factors to be considered. But it is economically suicidal for France to insist that capital that could be invested in cutting-edge sectors be poured down rabbit holes. Is there any reason to believe that Mittal is acting in bad faith? If so, I haven't seen it. If Hollande wishes to establish his bona fides with business interests, he must rein in Montebourg, who is serving his own interests with his ill-advised jawboning and not the interests of the government or even of Mittal workers.

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