EU throws down merger gauntlet

EU capitals Madrid, Paris and Warsaw are heading for confrontation with Brussels after national attempts to block cross-border mergers, the European commission has warned.

A blocked Polish bank takeover, French and Spanish energy merger rows have rung protectionist alarm bells just as Europe’s economy appears to be picking up after years of sluggish growth.

European competition commissioner Neelie Kroes told MEPs on Wednesday that EU free market watchdogs "will be hard" on offenders seeking to stand in way of globalisation.

“The commission will always look with concern at any attempt by national governments, directly or indirectly, to interfere unduly in the process of cross-border restructuring in Europe,” she told the European parliament.

“Any interference in this process by national governments which is not justified by legitimate interest… would risk to be seriously damaging for the prospects for Europe to benefit from the opportunities presented by market integration and globalisation.”

Kroesing for a bruising?

Without naming names, the Dutch commissioner, with a business and liberal background, has fired a shot across the bows of Polish, French and Spanish leaders ahead of an EU economic summit next week.

Europe’s internal market is the product of halcyon days for Brussels under commission president Jacques Delors and the EU executive is set to come out fighting on its behalf.

“To deny [mergers] to companies as a matter of principle or by means of failing to implement correctly the provisions of EU sectoral legislation introducing competition in the markets such as energy, telecoms, financial services… would amount to a serious restriction of their ability to adapt to the challenges presented by the integration of markets in the EU.”

“The commission is determined to guarantee that companies can effectively benefit from the advantages of the EU’s internal market. That is why enforcement of these provisions is, and will remain, one of the commission’s central priorities,” she said.

Green shoots of growth

France versus Italy, Spain versus Germany, France versus India and Poland versus Italy blocks to market liberalisation have raised a question mark over the EU’s ability to deliver on long-standing free market rules.

Brussels is particularly concerned that merger blocks could block a shake out in key economic sectors as Europe’s economy picks up speed into 2006.

The commission highlights figures showing that EU energy mergers in the first two months of 2006 alone were worth 7bn, almost as much as the 2005 total of 0bn.

Kroes argues “European industry is rising to challenges, including by the appearance of an increasing number of cross-border European businesses”.

“Mergers between companies based in different member states are likely to increase competition in the Member State concerned, thereby contributing to the realisation of concrete benefits for European consumers in the form of lower prices and wider choice,” she said.

“Take the energy sector as an example… Sustainable, competitive and secure energy will not be achieved without open and competitive energy markets, based on competition between companies looking to become European-wide competitors rather than dominant national players.”

Merger wars

Meanwhile, media reports indicate Italy's Enel is set to make a bid for French Suez despite political opposition from Paris and an Elysée backed blocking merger between Suez and Gaz de France (GDF).

The French backed takeover, involving the privatisation of GDF, may yet run into legal problems with the country’s constitution, suggests Le Figaro.

“Any undertaking whose exploitation has or acquires the characters of a national public utility or a monopoly in fact must become the property of the community,” says a clause quoted by the newspaper.

On another French protectionist front, the majority of European steel company Arcelor’s shareholders, 50 to 60 per cent, is in favour of Indian giant Mittal Steel’s takeover bid, Le Monde reports.

So-called "bank wars" continue in Poland, with eminent Polish central baker Leszek Balcerowicz saying "political control of monetary issues is dangerous".

• Previous article
• Next article