ONE reason for Italian anger over the decision on July 27th by Emmanuel Macron, France’s president, to stop Fincantieri, a shipbuilder from Trieste, winning control of a French shipyard at Saint-Nazaire, was that recent cross-border deals have mostly gone France’s way. Italian businesspeople have grown nervous about French firms’ “colonisation” by means of acquisitions in luxury goods, media and telecoms, including the €46bn ($55bn) merger between Luxottica, an Italian maker of spectacles, and France’s Essilor, announced in January (the group’s headquarters will be in Paris). The bad taste will linger even if the two governments strike a deal over Saint-Nazaire by the autumn, as they have pledged.

Yet Mr Macron’s move has been even more dismaying for those at home who want the state to get on with privatisation. During his presidential run Mr Macron promised to raise €10bn from sales of some of the state’s sprawling portfolio of holdings in firms. The aim was to pay for a new fund to help other companies invest in innovation. His threat to nationalise the Saint-Nazaire yard (rather than cede control to Fincantieri) is a retrograde step.

The direction of travel was supposed to be towards sell-offs. For the past few years the French state has been quietly disposing of its stakes in various regional airports, including Lyon, Nice and Toulouse. It was Mr Macron, as economy minister in 2015-16, who oversaw the sales and who pressed for the disposal of Groupe ADP, a large company that owns the main airports in Paris, at Charles de Gaulle and Orly.

Mr Macron left office before he could finish the job and ADP remains 50.6% state-owned. But under his economic team, led by politicians drawn from the centre-right, its sale looks all but inevitable (and should raise some €7bn). An obvious bidder is Vinci, a French infrastructure firm. Yet privatising airports only goes so far. The question is what comes next. Mr Macron’s government will soon, probably after the summer, announce its plan for ADP and say which other stakes are to be sold off.

A smaller role for the state in business is long overdue. A couple of decades after most countries in western Europe sold off many of their corporate holdings, France still has a huge portfolio. According to a report in January by the Cour des Comptes, an independent public auditor, the state has investments in nearly 1,800 firms, holdings which together are worth almost €100bn. The state-owned sector in France employs nearly 800,000 people, the most of all the countries surveyed by the Cour des Comptes (see chart). The number of firms in which the state has a majority stake has been rising since around 2006.

Public holdings are mainly managed by the Agence des participations de l’État (APE), by Bpifrance, a public-investment fund and the Caisse des Dépôts et Consignations (CDC), a state investment bank. The Cour des Comptes reckons the trio are doing a poor job; its report was scathing about public management of corporate assets over the decades (while recognising some recent improvements). It laments a lack of purpose in ownership and chronic failures of supervision, for example in the collapse of Areva, a nuclear firm 92% owned by the state. One curse for EDF, an energy utility that is another big holding, was being made to absorb some of Areva’s struggling business last year. The auditor also sees confusion between the three agencies, describes overall financial losses in recent years, poor governance and concludes that “the state has difficulty being a good shareholder”. Even more damning is the verdict of a former boss of APE, David Azéma, who ran it until 2014. His experience, he explains, taught him that lumbering, publicly owned companies always lose value to nimbler competition. Political meddling hurts, he says, as when ministers rather than boards pick chief executives—who cannot be sacked however badly they perform. Politicians also bully, he says, citing pressure last year on EDF, forcing it to agree against managers’ wishes to finance and build Hinkley Point C, a nuclear power station in Britain that risks becoming a huge financial liability. Mr Azéma urges France “massively” to reduce the state’s stakes in all listed companies, or at least create proxy boards to block political meddling. All these problems help explain why the value of the 13 listed companies managed by the APE, worth some €66bn as of mid-July, has declined in recent years. The performance of a few big firms, notably nuclear and energy companies, was particularly awful. Most striking is the withering of EDF, 83.4% owned by the state. The utility’s share price was €86 in 2007 and has fallen to under €9. Despite generating over €71bn in annual revenue, the company, which has enormous liabilities, is valued at less than €26bn.

Politicians do show a new readiness to divest public holdings, partly because the national budget needs revenue. Trade unions, too, are likelier to accept at least limited change. Support for hardline unions has declined, notably with the emergence this year of the reform-minded CFDT as the single-largest union. Asked about sales of public assets, its leader, Laurent Berger, says it would be “idiotic” to separate the state from strategic sectors, but that his members could accept changes on a “case-by-case basis”. Yet some politicians are said to be lobbying to delay sales of public assets, arguing that innovation funds could instead be raised by setting aside cashflow from the firms. State bodies have grown cannier in finding ways of preserving their influence over companies, even as they reduce ownership. The APE’s holding in Safran, a big aeronautical and defence firm that has thrived in recent years, for example, has been cut from 30% in 2010 to just 14% this year. Yet the state retains nearly one-quarter of voting rights. It keeps other leverage, especially in the defence industry where it is a huge customer. It might further cut its holdings in Safran and could reduce its current 26% in another defence firm, Thales (that stake is worth just over €5bn). But it is less likely that the state would sharply reduce its 11% holding in Airbus, a plane manufacturer, that is worth some €6bn. Mr Macron is not entirely hands-off in his attitude to public assets and his decision about Saint-Nazaire shows a willingness to meddle in private ones too. As economy minister in 2015 he increased the state’s stake in Renault, a big carmaker, by 4.7 percentage points, to nearly 20%, in order to force the firm to obey a new law giving double-voting rights to long-term shareholders (ie, the state). That infuriated Nissan, Renault’s other big shareholder. Government officials now talk about selling some of the stake. Will Mr Macron and his team dare introduce radical changes? Probably not. A likelier outcome is a gradual slicing away of parts of public holdings. Bruno Le Maire, the finance minister, talks of the state stepping back slowly from holding corporate assets. That would probably mean trimming its €5bn stake in Orange, formerly France Telecom, for example.

The chairman of two large companies, one with a large state stake, suggests that in the end the role of state is “too important in French economic life” to be changed quickly. An official at the state-owned railways firm, SNCF, concurs. That firm devours billions in subsidies, but is popular with the public who would not countenance its privatisation, or that of any other firm seen as “strategic”. Outright privatisation of airports might soon be inevitable, but other changes are likely to come one step at a time, with some in the wrong direction.