Est. 2min 24-07-2007 (updated: 28-05-2012 ) suit_briefcase_pic_isp.jpg Euractiv is part of the Trust Project >>> Languages: Français | DeutschPrint Email Facebook X LinkedIn WhatsApp Telegram The Commission will look into introducing checks on takeovers of EU companies by state-controlled foreign investment funds, saying that it is concerned that funds run by countries such as China may be acting on politico-strategic considerations rather than economic motives. The Commission will, this Autumn, investigate whether takeovers by publicly controlled foreign investment funds are threatening Europe’s capital market, a spokesman said on 19 July. The announcement came after German Chancellor Angela Merkel said that her government was considering setting up a system, similar to that in the US, where a Committee on Foreign Investment can recommend that the US president block foreign direct investments that are deemed a threat to national security. Merkel, usually a committed free marketeer, said that the financial clout of state-financed funds had reached “hitherto unknown dimensions” and needed addressing at EU level. A spokesman for the Commission said that the EU has yet to decide its approach to Germany’s request, but added that Internal Market Commissioner Charlie McCreevy was already looking into whether the EU should develop a method of handling investments by third countries into EU companies. He said that any solution must be based on the EU Treaty. Trade Commissioner Peter Mandelson has suggested that one solution would be to allow EU governments to use “golden shares” in order to stop foreign governments taking control of key industries. Such shares have been used in the past by EU governments to give them controlling voting rights in companies that have been privatised. The system has also been touted by Merkel and French President Nicolas Sarkozy as a means of guaranteeing their governments a say in the running of European aerospace and defence giant EADS, following the company’s management shake-up (EURACTIV 17/07/07). But Brussels is traditionally strongly opposed to this type of state interference (EURACTIV 29/09/06). Read more with Euractiv Media companies urge Commission to turn down copyright proposal A coalition of large media companies in the broadband and online TV markets have urged the Commission to reject the terms under which collecting societies have proposed to share benefits of online music, saying that the proposed deal would stifle competition and harm cultural diversity. Subscribe now to our newsletter EU Elections Decoded Email Address * Politics Newsletters Positions German Chancellor Angela Merkel said: "One can question whether these funds are solely concerned with attaining a high return on capital…State-owned funds can also have politico-strategic aims in mind that could be problematic in sensitive areas." She added: "This is a new phenomenon that we must tackle with some urgency…It's responsible to have an EU-wide discussion about this." The Chancellor expressed her preference for US procedures, which allow the government to vet possible acquisitions by such funds, notably in defence-related areas. She added that she was "worried" that if no common EU-wide approach is taken, each member state would adopt its own standards, opening the door to protectionist attitudes, such as in France, where strategic industries are defined "in a very broad way" (EURACTIV 01/09/05). Commission Vice-President Guenter Verheugen said that it was a matter of finding the right balance between defending the freedoms enshrined in the EU Treaty, such as the free movement of capital, and defending the EU's wider interests. "I understand the view that we have industrial sectors in Europe that have a strategic importance," he told Reuters, but added: "The question is, if you want to defend a strategic industry, how far can you go without creating strong distortions of the market and violating treaty principles?" Oliver Drewes, spokesman for Internal Market Commissioner Charlie McCreevy, said: "We believe in the internal market, which is based on certain principles of freedom…We want to assure a guarantee that everybody who operates on that internal market, which also has of course an external dimension, operates on the principles of that freedom as well." Trade Commissioner Peter Mandelson said: "These huge state-backed funds are a new phenomenon. I agree that they raise new questions. But I do not agree that our immediate conclusion should be to reject their investment in Europe. I would be more worried if Europe's markets were not attractive to such investment...Would we be content to see such funds invested everywhere but in Europe? I think not." Nevertheless, he said that blocking foreign investment could be legitimate in cases in which foreign state-controlled funds seek to take over EU companies in sensitive industries, which are protected domestically by the buying country. "Maybe we could create European golden shares. But the aim must always be reciprocal market openness not reciprocal protectionism," he told an Italian business paper, adding that Brussels must have the last word on this subject. The British government has not yet issued a response, but Merkel's plan is likely to meet resistance from the new Chancellor of the Exchequer, Alistair Darling, who is keen to protect the country's investment-friendly image. Earlier this month he criticised European governments trying to limit foreign competition, saying: "I think it is nonsense," he said. "Economic patriotism is protectionism, and there is no other name for it." BackgroundOver the past five years, "sovereign wealth funds" have boomed in countries such as China, Russia and the Middle East and now total around $2.5 trillion. These state-owned funds aim to channel excess foreign-currency reserves into bonds, stocks, property and commodities, in order to reduce the volatility of government revenues, build up savings for future generations or, in some cases, to finance war efforts or political campaigns. As these foreign-government funds appear increasingly destined to buy companies in Europe, in sectors as sensitive as defence or energy, there is rising concern that they could be used for political rather than economic motives. Timeline Autumn 2007: The Commission has said that it will investigate whether EU measures are needed to keep track of bids by foreign sovereign wealth funds. Further ReadingEU official documents Commission:DG Internal Market: The free movement of capital [FR] [FR] [DE] Press articles Reuters:EU looking into takeovers by state-run funds Forbes:Merkel Plays Protector Financial Times:Berlin looks to vet foreign fund deals AFP:Bruxelles va examiner les fonds d'Etat étrangers dénoncés par Merkel Le Monde:Peter Mandelson : "Je contrôlerai mes nerfs, j'espère que les autres aussi" AP:Auch EU-Kommission besorgt über nichteuropäische Staatsfonds Handeslblatt:Mandelson will „goldene Aktien" als Schutz
