The planned merger of Gaz de France and Suez to create one of Europe's largest energy groups has once more underlined President Nicolas Sarkozy's determination to keep a firm hold on French industrial policy.

The deal, sealed after pressure from the president to end an 18 month-long standoff, will see Gaz de France privatized but will leave the government holding a stake of more than 35 percent in the combined group.

After a series of coups ranging from the release of a group of foreign nurses from Libya to an agreement over a revised European constitution, the deal was hailed on Monday as another triumph for the hyperactive French president.

Sarkozy seals the merger between Suez and Gaz de France, headlined business daily La Tribune.

Sarkozy came to power with the image of a market-friendly reformer eager to break with the conservative policies of his predecessor Jacques Chirac but he has never made a secret of his instincts to shape industrial policy.

Earlier this year he succeeded in removing a reference to free and undistorted competition from the European Union's aims in a proposed treaty to overhaul the bloc's institutions.

As economy minister, he prevented a takeover of French engineering group Alstom by its German rival Siemens AG in 2004 and he has not shied from confrontation over exchange rates with the European Central Bank.

This is all within a Gaullist tradition, said Nicolas Bouzou, an economist at Paris-based consultancy Asteres.

For years, industrial policy for governments of both right and left amounted to privatization and it's a bit ironic that it should be a right-wing government with a fairly liberal image at home at least, that should be doing this, he said.

INTERVENTION

The political sensitivity of a merger that could affect households across France had always been clear and Prime Minister Francois Fillon said on Monday Sarkozy had demonstrated his pragmatism over the deal.

Long believed to be skeptical about the Gaz de France-Suez deal, originally proposed by former Prime Minister Dominique de Villepin, the president had previously pledged not to cut the government's stake in Gaz de France below 70 percent.

His change of heart came after Suez agreed to shed much of its environmental services activities to cut its market value and allow a merger of equals with the smaller Gaz de France.

It was not enough to satisfy unions or the opposition Socialists, who accused Sarkozy of ignoring consumers and selling out to private business.

It's a bad blow for employees and consumers and it corresponds to a privatized conception of industrial policy, Jean-Claude Mailly, secretary general of the Force Ouvriere union said on Monday.

But Sarkozy himself has always rejected the economic liberal tag often applied by left wing opponents, saying he would never hesitate to intervene if he felt it necessary to protect French industry.

I am not afraid of having an industrial policy, he said in a speech to employers last week. I will not leave our industry open to all kinds of dumping and speculators. I want France to have an energy policy that will give it security of supply, independence and competitiveness.

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