Austrian privatisation. How not to sell things

Defending puny national champions

KARL-HEINZ GRASSER, Austria's finance minister, is an admirer of Friedrich Hayek, the Austrian-born free-market economist who inspired Margaret Thatcher. But he has recently found himself defending state-controlled national champions - and thus sitting rather closer to his French counterpart, Nicolas Sarkozy, than to the iron lady.

In an echo of Mr Sarkozy's action earlier this year, when he saw off a bid by Germany's engineering giant, Siemens, for parts of France's Alstom group, Mr Grasser this week rebuffed Siemens for taking an interest in VA Technologie, a smaller Austrian firm. He even authorised the state holding group, IAG, to take up its share of a planned VA Tech capital increase, to maintain its stake at 15%. Siemens had not even made a formal bid. But its announcement of interest in parts of VA Tech last week caused a furore in Austria, where any sale of industrial assets to foreigners tends to be a hot political issue.

Last month, Wolfgang Schussel, the chancellor, forced Mr Grasser to walk away from a deal to sell the state's 42% stake in Telekom Austria to Switzerland's Swisscom, for about €3.2 billion ($3.9 billion). The finance ministry also shelved plans to sell a quarter of the state-owned postal service to Germany's Deutsche Post. Mr Schussel does not want to take any chances after last year's storm over the sale of Voestalpine, a steelmaker, almost led his coalition partner, the far-right Freedom Party, to leave the government. Soon afterwards, Mr Schussel's centre-right People's Party did badly in regional elections.

Sensing the prevailing public mood, Jorg Haider, the driving force in the Freedom Party, has joined trade unions, opposition Social Democrats and most of the country's opinion-makers to defend the remaining “national champions” against foreigners. Conveniently his tactics are embarrassing Mr Grasser, a former Haider protege who defected to Mr Schussel's side two years ago.

All this leaves privatisation, nominally a government priority, in tatters. There is not enough domestic capital to produce “hard-core” shareholders for all companies. Selling shares only on the tiny Vienna bourse would mean low prices, which would be bad for the budget and still leave privatised companies vulnerable to unwanted takeover bids. The state may be stuck with its shareholdings for years to come - and with Brussels competition authorities watching for hints of illegal state aids.

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