Paris should save its energy

Date: 13/05/1999

THE thousands of workers who demonstrated outside this week's meeting of EU energy ministers can be forgiven for fearing the loss of their livelihoods.

Already, 250,000 jobs have gone among the EU's gas and electricity producers and suppliers, and the European Federation of Public Service Unions believes as many again will be lost over the next four years.

As ever, the French government is riding the labour tiger. Instead of arguing the case for the creeping EU energy market liberalisation they agreed to, French politicians are dragging their feet 'in defence of the workers'. All the Union's other large member states introduced laws opening 25% or more of their markets to competition well before the mid-February deadline, with the aim of raising this threshold to 33% within four years. Germany, Sweden, Finland and the UK are even prepared to allow households to shop around for the best energy deal.

Paris alone missed the deadline and its draft law, which is not expected to get through parliament until the autumn, would still allow suppliers to hand-cuff corporate customers into three-year contracts.

Dutch Economy Minister Anne-Marie Jorritsma is right to complain; not just because this violates the spirit of liberalisation but also because these restrictive contracts are an open invitation to predatory US suppliers to set up shop in France - hardly a French aim. In a week when Finance and Economy Minister Dominique Strauss-Kahn once again spelled out his plans to match the Americans for their innovation and stunning nine consecutive years of economic growth, the performance of his ministry in the energy field showed once again how French economic orthodoxy misses the point entirely.

It is still early days but it looks as though the US has undergone a supply-side revolution, raising the productive capacity at which the economy can operate before inflation takes off. This was not achieved via grands projets or new pan-EU committees, but by letting the markets do what they do best - innovate to shape demand. Opening up the market for energy will push down fuel prices for industry, cut costs for the small and medium-sized enterprises we are all supposed to care so much about, and help to create an innovative environment.

Strauss-Kahn and his Junior Energy Minister Christian Pierret should leave the battle-field of three years ago and talk instead about creating the uniform transmission pricing systems for cross-border electricity that are needed to create a true single market. That is, however, probably the last thing they want when lop-sided law-making gives them exactly the kind of competitive advantage they need.