The French against the Italians, the Spaniards against the Germans, the Poles against the Italians, Luxemburg against a Netherlands-based company, and in between the EU Commission. Europe is experiencing a wave of merger initiatives, and, at the same time, a wave of state intervention against market-driven, cross-border takeover bids. For example:
* French and Luxemburg government resistance against the hostile takeover bid by Mittal Steel, the world's largest steelmaker, on behalf of its French/Luxembourg rival Arcelor;
* The Spanish government's attempts to prevent a takeover of the Spanish electricity company Endesa by its German competitor Eon;
* A hastily arranged marriage between the two energy companies Gaz de France and Suez, initiated by the French authorities in order to prevent a takeover of Suez by the Italian energy concern Enel;
* A political storm in Poland concerning the merger of the two banks BPH and Pekao, owned by UniCredit of Italy, and the growing market-share of foreign-owned commercial banks in the domestic banking market.
Whether such walling-off attempts risk "an August 1914 effect," as the Italian economics minister Giulio Tremonti warns, is rather doubtful. But revived protectionism, particularly in the energy sector, and the promotion of "national champions" could potentially spread by epidemic proportions--becoming sort of an economic bird flu in Europe.
Whereas the Mittal bid was characterized by its opponents as "a symbol of globalization against a symbol of Europeanization," the resistance against the subsequent intra-European takeover offers exposes the deep-seated distrust on the part of European governments of the rules of the European single market and the oversight role of the European institutions. This development is particularly irritating because, in contrast to past practice, governments are not afraid of deliberately projecting the image of acting in an anti-market, protectionist manner. Under the label "economic patriotism" ad hoc legislation is being prepared on the national level allowing national authorities to veto or impose conditions on foreign takeovers of "strategic assets," facilitating the dispersion of "poison pills" by companies trying to thwart unwelcome takeover bids, or prohibiting mergers with foreign companies (partially) those owned by their governments. France has announced that it intends to protect by law eleven "strategic sectors" against foreign investors, prompting EU internal market commissioner Charlie McCreevy to warn of creating a new Maginot line. The head of the Luxembourg government, Jean-Claude Juncker, on his part, is questioning hostile takeovers as an instrument for corporate restructuring in the European Union altogether.
What is behind the wave of neo-protectionism and economic nationalism?
The natural suspicion that government involvement merely represents the usual tendency of companies which are afraid of being exposed to stronger competition to mobilize public support for their purposes comes up too short as an explanation. Also, governments should know better than what they proclaim publicly, namely that "national champions" provide more reliability in the services of utility companies or in the supply of banking services, and contribute to more competition in the markets. Empirical evidence suggests the opposite.
More than anything else, government intervention in national energy, steel, banking, and other markets rather reflects the wish to control the forces of markets and globalization, seen as threats by many Europeans, and a reawakened belief in national solutions.
The distrust in industrial restructuring through market forces is based on the conviction that nationality of company ownership matters, and that governments become stakeholders when self-appointed "national champions" are affected or when a major corporate reorganization …