PARIS, Oct 19: France will hold off for six months to a year before privatising Air France due to tension over Iraq, French Finance Minister Francis Mer said on Saturday, in the first clear sign the government is reconsidering the timing of state sell-offs.

We have to sell Air France for what it’s worth, not in the current aerospace climate but when things look better in six months to a year, he said in a French radio interview, extracts of which were released in advance of the broadcast.

Given what’s happening with developments regarding Iraq, I don’t think air transport would be regarded as a particularly attractive stock market investment in the near term. I think it will have to wait until next spring, he told Radio Classique.

Mer said in July that Air France would be among the first in a string of asset sales and that his centre-right government was aiming to carry out the sale of shares to private investors at the end of the year or the start of 2003.

Until now, the announced plan was to cut the state’s current controlling stake of 54.4 per cent stake in the airline to 20 per cent or less.

On France Telecom, the ailing former monopoly in which the state still has a stake of 55 per cent, Mer said he hoped a recovery plan would be drawn up in the coming month.

Quite a lot of money is going to have to be injected into France Telecom one way or another, Mer said. We will do it when the time comes although the timing will be linked to the need to ensure permanent credibility with financial markets.

The idea is clear. We are starting with a change of management and by posting, in the next month, a new strategy that may not be revolutionary but which will allow the new management win market credibility, he said.

Then, we will find the least bad moment to carry off the capital increase, he said.

Officials say the government wants to ensure that whatever financial package is drawn up does not trigger lengthy delays and complications with the European Commission, which has powers to vet and ban certain state subsidies in the European Union.

Thierry Breton, the new chairman appointed by the government on October 2 following the departure of Michel Bon, said as he took up the reins he would give himself two months to come up with a refinancing plan.

Estimates put the scale of the operation at somewhere in the region of 15 billion euros, money badly needed by a company with 70 billion euros in debts, on which some repayments are looming.

Mer, head of the world-leading steel producer Arcelor until he was recruited to join the government that won June elections, displayed frustration with the Brussels-based European Commission over the issue of state-owned Electricite de France (EdF).

The Commission announced on Wednesday that EdF — in which the government plans to sell a small stake — had benefitted from cheap government credit and that Paris must repay 900 million euros that amounted to unfair state aid.

He said Mario Monti, the European Commissioner in charge of policing anti-trust issues and state subsidies, had picked an awkward time to present the issue to his Commission colleagues in Brussels and take action.—Reuters