In the land that coined the term grand projet, all is not well. Economic slowdown and austerity have helped to make the French government led by President François Hollande one of the most unpopular in modern history.
British infrastructure professionals sometimes look across the Channel with envy at the drive, determination and deep pockets of the French in delivering a well-kept (and privately financed) toll motorway network, an impressive high-speed rail network, hydroelectric and nuclear power stations, and a capital city airport (Charles de Gaulle) that increasingly breathes down Heathrow’s neck. In recent years, France has continued to procure big projects in the energy, transport and social (such as education or healthcare) sectors at a greater rate than the UK. But France’s economic doldrums could put a stop to that reputation.
The first sign that something was amiss less than three weeks after Hollande took office in May 2012, when his government cancelled the award of a contract to build, operate and finance a new motorway bypass around the city of Strasbourg to Vinci, the biggest construction company in France (and the world). The project was politically and environmentally controversial, but it had been awarded by the previous government in January that year. Vinci had four months before the new government (known to be hostile to the project) took over, but failed to get a signed contract. Why? Because of banks’ unwillingness to finance the project given the risks involved. Their loans would have had to be repaid entirely from toll revenues on the bypass, at a time when France’s credit rating was being downgraded and disposable income was being squeezed by tax rises and growing unemployment. Those same economic problems were impacting on the financing costs of French banks, of which one of the biggest, Crédit Agricole, was to have financed the project.
Even infrastructure projects already under construction aren’t safe. In November, violence erupted in the region of Brittany against the setting up of a new nationwide electronic tolling system that charges heavy goods vehicles for travelling on previously toll-free highways. The ‘écotaxe poids lourds’ project, which was awarded as a public-private partnership contract in 2011, was intended to reduce carbon emissions and create a new funding stream to pay for local transport infrastructure. But opponents were horrified at the prospect of Brittany, a depressed region that has seen many businesses close, being strangled by a tax on businesses bringing goods in and out. Rioters smashed the newly built gantries that carried the tolling equipment. The Hollande government still hasn’t implemented the toll, and is at loggerheads with the private contractor: once again, political hostility and economic adversity have allied against the cost of new infrastructure. Meanwhile, the state is missing out on toll revenues forecast at over a billion euros a year, hardly helping it restore the public finances.
Another major project, to build a new canal linking the River Seine and River Escault, has been delayed since summer 2012. The government has finally given up trying to deliver the project, known as Canal Seine-Nord, through a public-private partnership for the compelling reason that to do so would cost €1.5 billion in financing costs alone*. The estimated cost has grown from an unfeasibly low €4.2 billion in 2011, which overlooked those financing costs, to €7 billion last year. The project will happen, they say – but it will have to be retendered. Like the Strasbourg bypass, the project would have advanced further by now had the financial markets felt willing and able to support it. But they don’t. It’s too big, and France is too stressed.
Mind you, it’s not all bad news. The French state presses on with several big toll road projects, which it hopes it will be able to persuade the private sector to finance in exactly the way it failed to do with the Strasbourg bypass. And it managed to close a deal for a bond-financed new motorway last October, though that had the advantage of not relying on toll revenue.