When the State takes the place of the defaulting shareholder of a failing business, the question of the proper use of taxpayers’ money is legitimate.
Pool losses to better privatize profits has obviously never had a good press .
The accounting analysis comes yet (a little bit) to the rescue of such practice that is far from exceptional.
The company operates as a traffic officer of economic flows, cashing in proceeds that do not belong to it and paying for purchases, for staff salaries, financial expenses and for the taxman as well.
Consider a company releasing an added value of €40 after €60 of costs and before paying €30 for its employees and €15 in financial expensess. There will remain a loss of – €5 which means potential bankruptcy unless the company is bailed out thanks to a €5 subsidize.
Isn’t the public interest to grant the subsidy of €5 if it saves the €60 due to suppliers and the €30 due to workers?
Adam Smith should be wary … the temptation is strong to force the famous “invisible hand” of the market by mixing private and public interests !
Dominique F. Pasquier.