Outlook: Messier still on the bridge as Vivendi sinks beneath waves

Sonic versus Jumbo; Euro myths: part 1

Jean-Marie Messier, chairman of Vivendi, is accused by many of his countrymen, including President Chirac, no less, of cultural vandalism in attempting to Americanise his media to music, water and construction conglomerate. In at least one respect, however, Mr Messier remains immune to the unsentimental cut and thrust of Anglo-Saxon capitalism. Despite a wild and seemingly indiscriminate series of acquisitions which so far has succeeded only in destroying shareholder value on a positively heroic scale, J2M, as he likes to be known, is still there. In any British or American company, he would surely have been fired long ago.

Only one of Mr Messier's strategies in transforming Vivendi from a dull old construction and water company into a media powerhouse has unambiguously payed dividends, and that's the crunching together of Universal Music with the music interests of Seagram. The resulting music goliath is now far and away the biggest and most profitable music major in the world and its rostrum of contemporary artists is the envy of all others. Small wonder Universal and its largely American senior management is desperate to break away from both Mr Messier and Vivendi. The rest of the group is fast slipping beneath the waves, weighed low with debt and paralysed by the conflicting needs of its myriad of different businesses.

In its present form there is no rhyme or reason to Mr Messier's creation. It should be broken up and sold off piece meal, yet Mr Messier won't stand for it, and for the moment there seem to be no obvious alternatives to his dictatorship. Apparently worried sick about the dangers of getting caught up in a collapse of Enron dimensions, all others are jumping ship, including yesterday his old pal and New York neighbour, Bernard Arnault. But Mr Messier sails on.

The story is little different at France Telecom, which seems to be in a state of near terminal crisis. It has missed the boat as far as having a British Telecom style rescue rights issue is concerned, a debt for equity swap is out of the question since the French Government wouldn't tolerate the loss of its controlling stake, and asset sales in these markets would look desperate in the extreme. Through it all, Michel Bon, the main architect of FT's misery, carries on regardless. The French way is to ignore short run costs and setbacks and play for the long term. But as John Maynard Keynes remarked, in the long run we are all dead.

Sonic versus Jumbo

The Farnborough air show is less than a month away and this year the dogfight between Boeing and Airbus promises to be even more intense than usual. Will the Sonic Cruiser fly at last or will it be flattened once and for all by a 560 tonne super jumbo called the A380?

The Cruiser is still a paper plane in every sense of the word, and if the noises emerging from the Seattle-based manufacturer yesterday are any guide, that is the way it will remain. Flying at just below the speed of sound and turning London-Sydney and New York-Tokyo into non-stop services, the Cruiser sounds like the ultimate banker's shuttle. But when half the world's airlines are struggling just to stay in business, a plane which transports only 250 of the most well-heeled passengers at ticket prices to match is never going to be high on the agenda.

The A380, on the other hand, is a very much for real, even if it has only become airborne with the help of £2bn in subsidies from the taxpayers of Britain, Germany, France and Spain. That hardly makes it a better commercial proposition. Had Airbus been forced to rely on the capital markets alone for funding, then the A380 would be even deader than the Cruiser. It may still turn into the airborne equivalent of the Millennium Dome.

The last decade has taught the airline industry that what passengers want is greater choice and greater ability to fly point to point in smaller aircraft. That is why production of the A320 and the 737 is filling the factories in Toulouse and Seattle right now, and why airlines are trading in their 747s and replacing them with smaller 777s and A330s.

The A380 is a gamble that in the next 20 years passengers will be content to be herded 600 at a time onto a flying gin palace and flown from one hub airport to another where they will then pick up a connecting flight to their final destination. The Sonic Cruiser may be a Boeing too far, but the boys from Seattle are surely right in thinking that when it comes to the future of air transport, smaller will mean more beautiful.

Euro myths: part 1

Here begins an occasional series of commentaries about the euro, and before you pass briskly on, no, this one is not going to be about the trials and tribulations of the stability pact, shot to bits though the letter of the pact might now be after the concessions agreed on France's behalf at the Seville summit last weekend. Rather, the intention is to explode some myths about the euro in the run up to the Treasury's assessment of the five economic tests, expected to begin this autumn. Since pensions continue to be the issue of the moment, they provide a good starting point. The eurosceptic pensions myth is that Britain, with its comparatively mature and well funded private pension provision, might somehow be made to cough up for the huge unfunded pensions liabilities of the rest of Europe should we join the euro.

It's a scary, and logical enough presumption, but it is also largely unfounded scaremongering. In fact, the Continent's supposed pensions timebomb is no such thing, since in no country does the state provision of earnings related pensions amount to a contractual obligation. In the European countries that have them, these are public policy commitments and in most European countries public policy is changing. In Italy for instance, there have already been two rounds of reform, cutting the peak cost of publicly funded pensions from 23.5 per cent of GDP to 15 per cent. Similar cuts in the public sector's liability are being achieved in Germany. Politicians naturally don't trumpet these things, so you rarely read about them in the British press. When Mrs Thatcher grasped the nettle in Britain during the early 1980s by abolishing the earnings link for the minimum state pension, she wisely kept pretty quiet about it, and it was several years before anyone much noticed.

Slowly but surely people are getting the message, not just in Britain but across Europe too; you cannot trust governments to provide you with a worthwhile pension. Even if these liabilities are not entirely reformed away, the no bail out clause of the Maastricht Treaty and the stability pact would ring fence the problem. In Britain we've been better at reforming away the pensions liability, but we've been much worse at addressing the growing problem of tax funded health care. Most health care costs are incurred in the last five years of a person's life, so the demographics alone are eventually going to swamp the Government's attempts to revitalise the National Health Service with more money. Perhaps the Europeans should consider keeping us out of the euro, for fear of being made liable for the Government's utopian commitment to a publicly funded National Health Service.

jeremy.warner@independent.co.uk