Commission performs emergency stop over VW action

Date: 06/03/03

COMMISSIONERS put the brakes on plans to start action against Germany over a law on ownership of Volkswagen this week, citing the need for extra legal analysis.

Commission President Romano Prodi told reporters he proposed a two- week delay, which he said was accepted unanimously by the 20-strong college, to ensure the institution has got its legal facts right.

He denied the decision was politically motivated - despite massive opposition to EU action inside Germany, including from Chancellor Gerhard Schröder.

"I suggested a more in-depth examination of certain legal aspects," said Prodi, adding that the issue would "definitely not" be discussed during the 21 March EU summit in Brussels.

This summit will cover efforts to boost the EU's competitiveness - including the need to cut barriers to the free movement of capital.

The decision to postpone the sending of a "letter of formal notice" - the first stage in legal proceedings against a member state - was a shock.

Frits Bolkestein, the internal market commissioner, who put the decision to take action to the college believes the so-called VW law is a clear breach of EU rules governing the free movement of capital. However, his spokesman Jonathan Todd insisted he was "happy with the decision" for extra legal analysis.

The law caps the voting rights in the company at 20%, irrespective of the amount of shares investors own in Europe's biggest carmaker. That means it is almost impossible for anyone to challenge the position of the Land of Lower Saxony, which holds 18.2%.

Schröder has a personal stake in the outcome of deliberations. He is a former state premier of Lower Saxony and VW board member, and made a personal pledge during last year's elections to fight to protect the law.

The Commission's record in spats with Germany is mixed: competition chief Mario Monti has attacked privileges enjoyed by regional banks. But the college bowed to pressure from Berlin last year when it postponed proposing a takeover directive until after the elections.

Commissioners have delayed plans to start action against Germany over a law on ownership of Volkswagen, citing the need for extra legal analysis.