De Palacio fuels rift on state utilities sell-off

Date: 10/05/01

By Peter Chapman and Laurence Frost

Spanish Commissioner Loyola de Palacio has fuelled a potential rift with Frits Bolkestein and Mario Monti by insisting that governments should have the right to stop state-owned foreign companies from taking over their newly-privatised companies.

In an interview with European Voice, the transport and energy chief said governments should be allowed to maintain a garde-fou - or safeguard - to stop the re-nationalisation of privatised firms by foreign raiders.

Without such a safeguard, she insisted, EU member states may be tempted to stall the liberalisation process which is meant to re-vitalise EU markets.

"What is nonsense is that if a member state decides to privatise a firm or an industry - following the big policy streams of the Union - and the day after there is a new nationalisation by a flag of a neighbour," said de Palacio, adding: "It is not a problem of the flag."

She said that while some countries had made great strides to liberalise, others had done the bare minimum.

France, one of the least enthusiastic liberalisers, was this week taken to court over its refusal to open-up its gas markets in line with EU law - but state-owned utility Electricité de France is a keen buyer of foreign rivals.

De Palacio said this was a "source of distortion" and was "putting governments in a very difficult situation".

Her comments come as Commission-ers prepare to decide whether to change EU policy on what De Palacio admits is a "delicate issue".

She forced a debate after criticising the Commission's decision last year to take her country to the European Court of Justice after using a domestic law to block the take-over of Spain's Hidroeléctrica del Cantábrico by Germany's Energie Baden-Württemberg (EnBw), part-owned by state-run Electricité de France.

The same law was invoked again this week when Madrid suspended the voting rights of EnBw and part state-owned Electricidade de Portugal, who both retain holdings in their Spanish rival. Madrid previously used the law to convince Telefonica to pull out of merger talks with the Dutch operator KPN.

Another way governments can block unwanted take-overs is by keeping 'golden shares' in the privatised company. These give them special voting rights to protect the ownership of the company, even if they hold a tiny minority of the share capital.

Competition Commissioner Monti has warned Madrid that this week's move could be challenged.

Bolkestein, meanwhile, is believed to be a supporter of the current policy, drawn up in 1997, which regards golden shares and similar arrangements as a restriction of the EU's single market.

His spokesman Jonathan Todd said the Commissioner told MEPs in March that he wanted to debate the issue "as soon as possible".

But he said a final date had yet to be set, and a discussion paper on the issue had yet to be finalised.

Spanish Commissioner Loyola de Palacio has fuelled a potential rift with Frits Bolkestein and Mario Monti by insisting that governments should have the right to stop state-owned foreign companies from taking over their newly-privatised companies.