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Bull: government subsidies undermine EU dream

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One of the strongest arguments in favor of the formation of the European Union was that it would give European companies a competitive advantage long enjoyed by those based in the US. Unfortunately, as the EU prepares for further expansion, the ideal of a single market continues to be undermined by national self-interest. Subsides for groups such as Bull disadvantage companies that obey the normal rules.

The European Commission has recently announced plans to take the French government to court over a €450 million loan made to French hardware vendor Bull. The European competition commission approved the loan last year provided it was paid back within a year. Although Bull has not released any figures since its 2002 results, the signs are that it does not have the resources to return the money.

The French government takes the view that EU regulations are at fault, suggesting that rules restricting state subsidies need to be re-examined as they are not "adapted to the current context".

The affection that the French government holds for Bull is exceptional and long-standing. Turn the clock back 10 years and you will find the EC getting irate about the endless French state subventions to what was then known as Compagnie des Machines Bull. The EC was concerned that Bull had received subsidies totaling over $2 billion in the decade 1982-1992.

The French government's involvement with Bull stemmed from its creation in 1966 of Compagnie Internationale pour l'Informatique, which was to be the backbone of the French computer industry. This was at a time when governments liked the idea of a domestic producer of computer hardware that could compete with the US and Japanese companies that had begun to dominate the market.

Today, hardware is a viciously competitive market - a status that has been of considerable advantage to users. The location of the head office of the company that produces the Intel-box on your desk has become an irrelevance.

Subsidies have not prevented Bull from turning into a huge loser. In 2002, it made a net loss of €549 million on revenue of €1.5 billion. The only way it can survive is by the state effectively subsidizing its customers to take its products. This situation distorts the market by taking work away from organizations that are forced to live by normal commercial rules.

If Europe is to retain its credibility as a free and open market, it needs to ensure that the anachronism of state subsidies to companies like Bull cease. Those assets worth saving are better taken over by companies who know how to run a business.

Source: Computerwire/Datamonitor

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