Germany and France are looking to protect European companies from the competition — particularly from global superpowers such as China and the United States — and prevent foreign companies from gaining access to critical sectors of their economies. As a result, the two countries are pushing for greater state protections against foreign takeovers and the creation of large European "champions" in key economic sectors. However, these plans will have to wait until the European Union selects new members for its main policymaking institutions.
What Happened
France and Germany's push to create large European companies that can go toe-to-toe with global competitors has hit a wall. On Feb. 6, EU Competition Commissioner Margrethe Vestager said that Brussels would block a planned French-German merger between rail companies Alstom and Siemens, arguing that the plan is incompatible with the bloc's antitrust rules and could lead to higher prices for European consumers. In response, German Economy Minister Peter Altmaier called for Europe to better defend its interests against global competition. French Finance Minister Bruno Le Maire said Vestager's decision was an economic mistake that would benefit China, where companies often have deep links with the state and regularly receive significant state backing.
Why It Matters
The French and German governments believe that the European Union should modify its antitrust laws to allow for the creation of European giants in important sectors, such as technology and infrastructure, that could compete against multinational corporations — particularly those based in China and the United States. Paris and Berlin are not alone in this desire and, in December 2018, a group of 19 EU member states published a joint document calling for new measures to ensure EU companies remain globally competitive. The European Commission, however, has traditionally been skeptical of such measures for fear they could lead to monopolies within the bloc's single market.
France and Germany have promised to present a joint initiative in the coming weeks to change EU competition rules, but such changes will probably have to wait. The European Parliament is scheduled to elect new members in May, after which EU governments will choose new members of the European Commission to take office around November. These changes in the composition of EU institutionsmean that any meaningful policy decisions will be delayed until at least the final quarter of 2019. And, even then, an issue as complex as antitrust laws could take months, if not years, to address.
Not everyone in Europe agrees that antitrust rules should be changed to allow mergers between large corporations.
In addition, not everyone in Europe agrees that antitrust rules should be changed to allow mergers between large corporations. Pro-market countries such as Sweden and Denmark, for example, did not support the December declaration that called for rules changes. They fear that the United Kingdom's departure from the European Union will remove a traditional opponent of state intervention in the economy, opening the door for policies that could create inefficient monopolies in Europe. Some German economists, moreover, have warned that central planning for the European economy could make the bloc less competitive. Those who share these concerns may face an uphill battle, however, considering that 19 member states appear to back the plan.
Germany's Growing Fears
France, rather than Germany, has traditionally been the EU member state that has pushed the hardest for greater state intervention in the economy. But politicians in Berlin have become increasingly concerned about foreign powers — most notably China — gaining access to strategic sectors of the German market. In 2017, a Chinese company's takeover of German robotics company Kuka sparked a national debate about foreign access to valuable German know-how.
On Feb. 5, Germany's economy minister launched a plan aimed at developing the country's industrial sector. The plan included a controversial provision that would allow the German government under "exceptional situations" to partially nationalize companies when they are at risk of takeover by a foreign investor. In addition, the proposal suggested creating a special investment fund to support such takeovers. The plan would only be adopted after discussions with political parties, business groups and trade unions, so it can still be amended. Indeed, some of these proposals might go against EU rules, which explains why Berlin is pushing to change them. Whatever becomes of the plan, its mere proposal shows the extent to which Berlin is concerned about foreigners — particularly those from outside the European Union — gaining access to its companies.
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