[NYTr] Capitalism under threat: EU divided over foreign state investments

[nytr at olm.blythe-systems.com]

sent by Simon McGuinness

[An interesting development in global capitalism is that cash-rich
formerly third world countries are using their surpluses to buy up
strategic shares in European industries.  Whilst this process is
considered good for capitalism, and indeed actively encouraged by tax
breaks and state subsidies when the purchaser is a US corporation, there
is unease when the investor is a Russian or Chinese state entity.  The
outcry against Gazprom buying up EU electricity utilities is just one
example of the unease.  Given the huge Chinese trade surplus and the
desire to dispose of sizeable reserves of US government bonds because of
the forced devaluation of the US dollar, this is a process that is only
just beginning.  We could end up with whole swathes of European industry
in Chinese ownership. The Chinese could, for example, buy European
aerospace companies and gain access to technologies with strategic
importance.  Globalisation was always a two-way street - let's see if
the promoters are prepared to accept the blow-back. -SMcG]


EU Observer - Jul 26, 2007


EU divided over foreign state investments

By Helena Spongenberg

The discussion on whether protective measures should be set against
foreign state investments of companies in the European Union continues
after UK finance minister Alistair Darling has spoken against such a
move. However, at the same time, the Dutch parliament has called for
protective barriers.

There is growing unease in Europe about the upward clout of
state-financed investment funds from Russia, China and the Gulf states
in European industry.

But Mr Darling said the UK would resist calls for a collective EU policy
vetting corporate acquisitions by foreign companies, when on Wednesday
(25 July) he spoke to the business community in the UK for the first
time since being appointed to the post last month.

The UK has benefited from, and continues to welcome, inward investment,
Mr Alistair said. "It is a sign of our success," he added, according to
press reports.

However, he criticised "closed" countries such as China by noting that
investment should be a two-way process, referring to the fact that it
can be hard for foreign investors to enter the Chinese market.

European countries should also open up more, he added. "I welcome
investment from Germany and France but that needs to be matched by
letting British investment in. That is what a single market should be
about."

While the UK has no intention of raising protective barriers, several EU
capitals and the European Commission have expressed concern over foreign
state investments from, for example Beijing and Moscow, to guarantee
European interests in keeping control of important and politically
sensitive key industries.

Meanwhile, a majority in the Dutch parliament on Wednesday backed a
return of so-called "golden shares" held by the government to protect
strategic industries against foreign takeovers.

The measure would give the holder veto rights in certain circumstances
and could be used to protect a company from possible takeover.

In the European takeover battle over Dutch ABN Amro bank, British bidder
Barclays announced this week it had teamed up with a state-linked
financial institutions in China and Singapore to boost its new bid.

Earlier in the week, EU trade commissioner Peter Mandelson, in an
interview with a German newspaper, suggested that golden shares could be
used to protect strategically important European companies against
foreign takeovers.

The EU needs to have the ability to protect its interests in strategic
industries that could be subject to improper foreign political
influence, Mandelson told the Handelsblatt newspaper.

German chancellor Angela Merkel has also recently expressed support for
some protection of EU companies from third country state investments.

Currently golden share provisions are illegal in the EU except for
security-related armament industries as they infringe upon free trade
and could be misused to protect national interest.

Mr Mandelson argues that individual member states of the EU should not
be given sole control of exercising golden shares, saying that otherwise
they would only follow their own agendas.