Business English: King of luxury upsets France's Socialists

Bernard Arnault, head of the LVMH luxury goods empire that has made him the richest man in not only France but Europe, said in a television documentary this year: "I feel like an ambassador through [LVMH] for the values that represent the civilisation, culture and the image of France."

So when it emerged last month that the dapper 63-year old - whose Christian Dior, Louis Vuitton and Dom Pérignon brands are regarded the world over as the epitome of French chic and joie de vivre - appeared to be turning his back on the country by applying for Belgian nationality, the news caused an uproar in his homeland.

It poured fuel on an already fiery debate about taxes, entrepreneurship, nationalism, the young Socialist government's economic policies and France's image abroad. But it has also exposed the country's deep-rooted unease with money, epitomised in the loosely translated maxim of Honoré de Balzac, the 19th century novelist, that "behind every great fortune, there is a crime".

  LVMH-CEO Bernard Arnault

In his reaction to the affair, Mr Arnault has displayed some of the characteristics - a secretive streak, prickliness and a litigious nature - that appear to have made him more feared than loved, within the LVMH empire he controls and outside.

"He is not in the business of being loved or feared. What he cares about is developing his group and he has done that very successfully," says Nicolas Bazire, an LVMH director and one of Mr Arnault's key aides.

Mr Arnault's application for Belgian citizenship emerged during a row about François Hollande's populist election promise to slap a top tax rate of 75 per cent on incomes of more than Euro1m - the world's highest marginal tax rate. Faced with attacks by big business and fears of an exodus of talent, the president has used nationalism to defend the measure, saying: "It is patriotic to accept a supplementary tax to restore the country."

So Mr Arnault's request appeared tantamount to defection. "He should have reflected on what it means to ask for another nationality because we are proud to be French," said Mr Hollande. For Pierre Moscovici, finance minister, Mr Arnault has "failed to be exemplary".

Mr Arnault, who emigrated to the US in 1981 during the last Socialist presidency, insists he will keep his French passport and pay French taxes, saying: "I am, and will remain, fiscally domiciled in France." With dual Franco-Belgian nationality, he can expand the "numerous investments in Belgium" held through Groupe Arnault, his private investment vehicle, he says.

Since Belgian citizenship is not required to invest in the kingdom, suspicions are that the move may be tax-related. But if that were the case, the luxury tycoon would probably have to reside in Belgium.

The twice-married father of five may be eyeing Belgium's favourable inheritance tax regime. He could also be planning some kind of alliance with Groupe Bruxelles Lambert, the investment company headed by his old friend and business partner, the billionaire Albert Frère. That he is up to something seems clear, given his stealthy and determined - many would say ruthless - approach to business, which has made him the world's fourth richest man, according to Forbes magazine.

His estimated personal fortune of Dollar41bn would on its own plug the Euro33bn funding gap France faces next year - which Mr Hollande is trying to meet through Euro20bn of tax rises and Euro10bn of spending freezes.

Johann Rupert, chairman and chief executive of Swiss-based Richemont, second to LVMH in the sector, says of his rival: "It's not possible for me to be as tough as him. He's a good financier and he's been successful, so you've got to give him credit."

  Arnault used Christian Dior as the base on which to build LVMH, which today has a market value of €64bn

French roots

Mr Arnault was born in Roubaix, northern France, close to the Belgian border. After an education at École Polytechnique - one of France's grandes écoles - he entered the family property company before leaving for the US. His big break came in 1984, when he returned to France and, aged 35, persuaded the Socialist government to agree to him taking over Boussac, the northern textile manufacturer.

He had spotted within the highly indebted conglomerate the seeds of his luxury venture. After selling most of Boussac's businesses, he used Christian Dior as the base on which to build LVMH, today with a market value of Euro64bn. His big idea was to develop a multinational luxury collection, now of more than 60 brands, in an industry typified by small-scale artisanal production.

Tall and slim, his blue eyes dart sharply beneath thickset eyebrows. He is taciturn but soft-spoken and courteous. To the outside world he is a cold-hearted financier but he is also a gifted pianist who relaxes in the company of those he trusts.

"He is a visionary to have used France and Europe as a base to sell in Asia," says Mr Bazire. "This was not so obvious 15 years ago. We have profited from globalisation, while others industries - such as carmakers - have suffered."

He has tasted failure - he lost the "handbag wars" for control of Italy's Gucci to France's PPR, controlled by the Pinault family, and he has also made paper losses of about Euro1bn in his Groupe Arnault investment in Carrefour, the under-performing hypermarkets group.

Mr Arnault's "ruthless" reputation comes from his ability to exploit family disputes, such as those of the Vuitton, Chandon and Hennessy families. Snapping up businesses earned him the nickname "the wolf in cashmere clothing". Now he is locked in battle with the Hermès family, whom he outraged by popping up in 2010 to reveal he held a 17 per cent stake in the silk scarves and Kelly handbag group. The two sides are headed for the courts after Hermès revealed that it had filed a legal suit over the way in which LVMH acquired the shares. Mr Arnault swiftly filed a counter-complaint for "slander, blackmail and unfair competition".

Famously litigious, he also began a lawsuit against Libération for "public insult", citing its "vulgar and aggressive" headline. Advertisements by LVMH's businesses for the next few months have also been pulled from the leftwing daily, which posted a full-page picture on Monday of a smiling Mr Arnault holding a suitcase, with the words: "Get lost, you rich jerk!"

The phrase echoed one delivered by his friend, the former president Nicolas Sarkozy, to a worker who refused to shake his hand. Mr Sarkozy was caught on camera telling the worker to: "Get lost, you pathetic jerk."

In Belgium, the reaction was different, a contrast that says much about French attitudes towards wealth-creation, say business leaders. Laurence Parisot, head of Medef, the employers' federation, deplored the inability of "anyone to pay hommage" to "this exceptional industry leader." On the same day, La Libre Belgique, the Belgian daily, ran a headline saying: "Welcome, Mr Arnault."

Thierry Breton, former finance minister and executive chairman of Atos, the information technology company, said: "Bernard Arnault is without doubt the greatest French - and possibly European - entrepreneur. It is a privilege for France to have such entrepreneurs - and we should keep them."

In a country sensitive about its international standing and worried about economic competitiveness, Jean-Pierre Raffarin, former conservative prime minister, judged: "The Arnault affair is a disaster for France's image in the world... [If Mr Arnault] doesn't have confidence in France, how do you expect others to?"