Newspaper article The Evening Standard (London, England)

Polls Put Economic Reform in the Slow Lane

Newspaper article The Evening Standard (London, England)

Polls Put Economic Reform in the Slow Lane

Article excerpt


SUDDENLY, the EU's economic reform is hitting heavy weather. The proposed fast-track process to create a single market in financial services is going slow in the European Parliament.

And two of Europe's most powerful governments, France and Germany, are digging in their heels on marketopening measures.

First, the governments.

It is old news that the French are reluctant to set a deadline for the opening up of their domestic energy markets. But now the German government has announced a draft takeover law that will make hostile bids more difficult. And Chancellor Schroder himself is threatening to veto the new Basel rules on bank capital on the grounds they hit small businesses.

For aficionados of EU politics, such populist grandstanding in favour of domestic producer interests means only one thing: elections.

France's presidentials are in May and Germany's Bundestag elections must be held by September. They may be even earlier if Schroder loses tomorrow's confidence vote to send soldiers to Afghanistan.

When two of the EU's biggest member States have imminent elections, progress of politically sensitive EU reforms tends to grind to a halt.

That is not comfortable for Prime Minister Tony Blair, who badly wants successes at the Barcelona economic reform summit in March.

Germany and the German MEPs were instrumental in rejecting the EU's proposed takeover directive in July despite a decade of discussion.

Commissioner Frits Bolkestein aims to bring forward new proposals next year, but now has to contend with an intended

German law that will make poison-pill and other bid defences easier.

Corporate Germany did not like the Vodafone takeover of Mannesmann.

True, the proposed takeover rules will insist on some minority shareholder protection by ensuring that a full bid is launched if a buyer owns 30% of the shares. But they also allow managements to erect defences with the backing only of the supervisory board.

Just as seriously, Germany's medium-sized family companies, the socalled Mittelstand, are up in arms about the new

global rules on bank capital (designed to align capital requirements with likely risk). …

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