Yes we are really, aren’t we. Especially if we are called Arcelor, or Danone, or Endesa, or Eni, or Enel, or Banca Antonveneta or Pekao. And what these champions have in common, and it is this which sets them so much apart from their footballing equivalents, is not the ability to win anything, but rather their capacity to lose, especially in a take-over battle from a foreign pretender. And just for this very reason it is, it seems, ok for you to include the referee in your line-up. Indeed such is the sporting prowess of these ‘champions’ that it is deemed that what they are most in need of is not the cold harsh wind of competition, but rather protection, and indeed protectionism, anything rather than face outright competition from would-be global rivals. A rare breed of champions these.
I think before I go further, I would like to draw attention to one idea which holds us all together here at Afoe:
“Purity of race does not exist. Europe is a continent of energetic mongrels. – H.A.L. Fisher”
So to rejoin the main them, what do we say to India or to China, or relatively poor Latin American countries like Colombia and Bolivia – open your markets to us we say, the competition will do you good (read Suhit’s last post). As well as being inefficient, we also seem to be hypocrites. But hold on a minute, isn’t there are bit more here? Just who exactly are these foreign competitors that we all seem so worried about? Well these days the foreigners who bother us most normally seem to be other Europeans. In fact, at the end of the day the Mittal/Arcelor affair is all about two European based global companies. Now come a bit nearer home, to the cases of the banking and electricity sectors like Poland’s Pekao, or Italy’s Eni and Enel, or Spain’s Endesa
or France’s Danone (or just about anything else for that matter according to the proposed new law). The rivals from which we are so in need of protection are in fact our main Eupoean competitors.
Two questions are raised here: what exactly does ‘foreign’ mean in an EU context, and what kind of benefits can consumers expect to see from all the protection that is being lavished?
Let’s start by looking at one or two specific cases begining, perhaps with Spain, and Jose Luis Rodriguez Zapatero. According to reports Zapatero (who regular readers will know I have defended more or less uncritically of late) is trying to reassure the EU that he has no intention of using his golden share:
Prime Minister Jose Luis Rodriguez Zapatero told reporters at the Senate that the government will respect market rules, but will also seek to protect Spain’s national interest.
“Markets are very important but for this government the citizens are more important,” said Zapatero, who told the head of E.On AG in a meeting Tuesday that he is strongly opposed to its 29.1 billion euro ($34.72 billion) offer for Endesa.
Possibly precisely because it is not clear what he can have meant by citizens being more important than markets in the context in question, Brussels have more or less given him a formal warning:
The European Commission warned Madrid on Wednesday not to use illegal protectionist means to try to block Eon’s takeover bid for Endesa, the Spanish utility.
The warnings came as the German power group prepared to take its case for the â‚¬29.1bn ($34.6bn) offer on the road to shareholders, and as other utilities considered joining in the race. Brussels’ intervention was sparked by remarks from the Spanish government’s chief spokesman that Madrid would “do everything in our power to ensure Spain’s energy companies remain Spanish”.
Also since we are all in the EU, and in this sense are all Europeans, I simply cannot understand what this means anymore:
“I understand that Germany wants to have a strong global energy company, but so does Spain,” Zapatero said..
But what is the problem with saying: we want to have strong European energy companies? Full stop. I’ll tell you what is wrong with not saying it: 12 EU countries share a common currency. In theory they are no longer countries for all significant economic purposes, although in reality, of course, they continue to be so.
The Italian case doesn’t seem to be very different:
The threat of creeping protectionism across Europe deepened on Wednesday when Italy raised the prospect of toughening Italian takeover laws in retaliation against Franceâ€™s efforts to deter foreign bidders from acquiring French companies.
Giulio Tremonti, finance minister, said Italy was among the most â€œmarket-orientedâ€ countries in the European Union and disliked protectionism, but it could not ignore Franceâ€™s firm line on hostile takeover bids.
The European Commission on Tuesday threatened to bring proceedings against Poland’s attempt to block Pekao SA and BPH merger, the two banks in which Italian bank UniCredito has stakes.
Internal market commissioner Charlie McCreevy said he was not satisfied with Polish government’s response to charges that blocking the merger violates one of the fundamental principles of the European Union, that is of free capital law.
“I asked the legal services to examine the possibility of launching proceedings on the issue,” he said, adding that EC decision can be expected soon. .
The Bitter Pill To Swallow
Obviously the decision which has really set this train in motion was taken in France earlier this week:
France is preparing to push European Union takeover rules to their limits again by giving companies the right to use so-called poison pill defences to rebuff hostile takeover bids â€“ even if they come from companies unable to use similar strategies.
The new rules allow companies subjected to a hostile bid, or expecting a possible raid, to issue warrants convertible into shares at a discounted price to existing shareholders, making any offer more expensive and encouraging friendly talks.
Well, I mentioned consumers before, since consumers might, if anything, benefit from increasing competition, but there seems to be little of this here. Rather it is a question of protecting vested corporate interests and national state ones. The consumer only exists here as an afterthought.
Now all of this would be either good or bad, according to your point of view, except for one small detail, we have the eurosystem, and already it could hardly be said to be working optimally. When the French referendum was held last summer I made the point that what was really being voted on was in fact the future of the euro, since the continuity of the euro is predicated on a continuing process of political union (at least in the case the 12 participating states).
I think the French ‘no’ was the first major red alert signal that strong centripetal forces had stated to go to work, this week’s revival of petty nation state nationalism is the second. The attitude towards the freedom of movement of our fellow European citizens in the new accession states might be a third:
Service Workers: Stay Home
National interests can still trump good sense, as the demise of an EU initiative to liberalize trade in services shows
Many European Parliament members were mortified last year when voters in France and the Netherlands deep-sixed a European Union Constitution long sought by the region’s political leadership. But now the Parliament has done something that could hurt Europe even more…….
Productivity growth in Europe’s service sector has averaged well below 1% in recent years, vs. 3% in the U.S. Burdensome regulation is a big part of the problem, Mettler and other business advocates say. Sadly, the Lisbon agenda’s goal of making Europe “the most competitive and dynamic knowledge-based economy in the world” by 2010 seems more elusive than ever.
Business Week talks about national interests ‘trumping good sense’, I would go even further, national interests are in danger of wrecking the euro (even more than it is wrecked already that is). For the eurosystem to survive those member states who participate will have to denationalise themselves (not their state owned companies. please note, but the countries themselves) completely. This was always an implicit part of the euro deal. In the real world there are no free lunches remember. Did anyone seriously think that a small group of countries would simply enjoy very low interest rates – as a kind of ‘freebee’ – and that would be it?
The price to pay for the euro is to be paid in the heart, it means the end to the old petty forms of patriotism. Well we have to start somewhere, so instead of worrying about whether the Catalan statute imperills the unity of Spain, lets go down the other road: lets get rid of Belgium. Then lets get rid of France, Germany, Spain, Italy etc. Europeans aren’t ready for this many will say (in fact they just did in the referendum). Well then they aren’t ready for the euro I say. This is my whole point of view. The labour mobility issue is a side problem. We have a national champions mobility issue to address first. What we need isn’t just labour mobility it is mobility tout court (mental mobility, flexibilisation, not just of labour markets but of everything, especially of feelings which need to go up an abstraction notch). We are living in the past, not in the future. If we continue to stay there the future will come looking for us soon enough, of that we can be sure.