| Author (Person) | Davies, Eric | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Publisher | ProQuest Information and Learning | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 5.7.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 05/07/2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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In recent months, arguments over the importance of 'national champions' have caused industrial policy to find its way - in the words of Enterprise Commissioner Erkki Liikanen - to 'the top of the European political agenda', where its presence highlights yet another tension between 'old' and 'new' Europe. Recent interventions by the French Government have seen both a rescue package agreed for the troubled engineering firm Alstom (after a takeover by Siemens was resisted), and a merger between the drugs firms Aventis and Sanofi-Synthelabo (after the former had rejected a bid from the Swiss company Novartis). In Germany, a call was made by Chancellor Schröder for Deutsche Bank to become a 'superbank'. On 13 May 2004, France and Germany announced that they were planning to 'formulate a joint industrial policy aimed at creating a framework for mergers and joint-ventures between major German and French corporations'. Despite denials, such moves have been seen as an attempt to support 'national champions' and to fly in the face of current thinking on competitiveness. Internal Market Commissioner Frits Bolkestein was reported to have said that the Lisbon Strategy 'was all about the creation of conditions in which business, not bureaucrats and politicians, could transform Europe into the most competitive economy in the world by 2010'. Background Recent developments in the Union's industrial policy have been driven by the dual concerns of competitiveness and enlargement. In November 2003, the European Commission adopted a Communication entitled Some Key Issues in Europe's Competitiveness - Towards an Integrated Approach, which included an analysis of the problem of 'deindustrialisation' - defined as 'the relocation of large portions of industrial production to countries with lower costs and fewer regulatory constraints.' The same issue was also discussed in a further document, Fostering structural change: an industrial policy for an enlarged Europe, issued in April 2004. (Further details can be found in European Sources Online: In Focus: The Commission's view that deindustrialisation is a normal process contrasts sharply with that of the French Government: Prime Minister Raffarin has 'promised to combat de-industrialisation by forging “a real industrial policy” in strategic sectors' (see Financial Times: Why France and Germany? The Financial Times argued that 'Today's revival of the industrial champions idea at a European level owes everything to the present parlous state of the French and German economies and very little to any rational policy approach for dealing with their problems' (see: No-one disputes that Europe needs major companies; the debate is about how they can best be developed. The French approach is not new: 'Since World War II, many European countries have preferred dirigiste economic policies, characterised by heavy state involvement in industry' (see BBC News Online: Brussels slams state interference). 'The arguments adduced by governments for intervening in economic activities are numerous, but they all have a socio-political ring: to prevent the closure of undertakings which might give rise to collective redundancies, which are unacceptable in social and regional terms' (see Access to European Union: Monitoring State intervention). This observation was supported in one of the recent cases, when BBC News Online reported that the French Government had 'encouraged Sanofi to raise its offer' and quoted Prime Minister Raffarin's comment that: 'The choice of a merger between Sanofi and Aventis will allow the preservation of decision centres and jobs in France and Europe, and is in line with a strategic interest' (see: Aventis and Sanofi set for merger). Domestic political considerations were also thought to be behind the French Government's preference for Alstom to be bailed out, rather than bought out, with the BBC observing that French Finance Minister Nicolas Sarkozy 'is thought to have ambitions for the French presidency' (see: Alstom fuels Franco-German spat). The Financial Times also thought the tactics of the French government were 'heavily influenced' by the forthcoming European Parliament elections: 'By playing the national champion card Jacques Chirac, the president, presumably hopes to reassure voters he is standing up for their jobs' (see: 'Industrial champion policies not only subject commercial decisions to unhealthy political control' noted the FT, 'They are also based on false premises: that size equates to strength and that placing big bets on a few large companies increases the chances of success. The evidence suggests the opposite' (see: 'Europe does need strong companies to compete in increasingly global markets' said The Economist, 'But the way to nurture them is not to wrap them in cotton wool and to step in with help every time markets are tough' (see: Similar sentiments were expressed by the Commission in its Communication A pro-active Competition Policy for a Competitive Europe, which set out details of the new regulatory framework for competition which entered into force on 1 May: 'The benefits of competition also demonstrate the danger in arguments about the creation of “national champions”. There is nothing improper in companies growing into a sufficient scale to compete globally. However, this has to come about within a competitive environment and in full compliance with the competition rules.' Criticising the proposed Franco-German initiative, the UK's Trade and Industry Secretary commented that 'national champions are a very old-fashioned way of thinking. What we need are great companies that are not only doing well in their home markets but are doing well internationally' (see Financial Times: Leaders of industry have also voiced concerns over government intervention. The Chief Executive of Roche said: 'For me, the words 'national champion' do not link with the concept of a global industry ... I can't relate to nationalistic approaches in this arena', while his opposite number at Volkswagen described hopes of creating European industrial champions as 'nonsense', saying that 'businesses should be left to make their own decisions. European champions would succeed if there was an industrial logic behind creating them, he added - but would not work simply because politicians demand them' (see: Commissioner Bolkestein has been quite outspoken in his views on recent developments. Writing in the Financial Times ( 'In the European Union we need to continue to break down barriers between national markets and tackle constraints on competition. A single market, now comprising more than 450m consumers, is ideal for companies to exploit their comparative advantages and maximise economies of scale. This is precisely why the whole Lisbon strategy, agreed unanimously by EU leaders in March 2000, is based on creating optimum market conditions for industry and commerce, to make Europe the most competitive economy in the world by 2010. But to listen to recent statements by French and German politicians, you would think the strategy had never existed. Back in the 1960s, 1970s and 1980s, the perceived threat was Japan. Now, judging by calls by France, Germany and others for minimum company tax rates, it is the new member states.' In a similar vein, in a speech to an informal meeting of Competitiveness Ministers on 2 July, he told his audience that he was 'particularly worried about efforts to revive old style industrial policies and resurgent economic nationalism. Efforts of governments to pick and protect national champions are doomed to fail. In an era where the real challenge is trying to improve the EU's global competitiveness, these efforts look very old-fashioned indeed' (see: Frits Bolkestein: “Doing the right thing”). Within the Commission, responsibility for industrial policy currently falls to the Competition and Internal Market DGs. Both Commissioners - Monti and Bolkestein respectively - have a far more 'free market' approach than France and Germany would like. Indeed, the Financial Times observed 'How much easier it might have been for the French to rescue Alstom ... if there had been a French EU commissioner for competition policy' (see: Whether France will be in such a position remains to be seen. In common with its predecessors, the new Commission (which starts work in October under the Presidency of Jose Manuel Durão Barroso - currently Prime Minister of Portugal) is likely to reorganise portfolios. It has been suggested that a new 'industrial policy' DG might be created; if it is, there is likely to be considerable debate over who should head it. To that possibility can be added the thought that a proposal has been put forward for the appointment of a 'super-Commissioner', responsible for promoting economic reform and competitiveness. France and Germany were two of the Member States pushing for the idea - which they hope would help counter the trend within the Commission of opposing interventionist policies (see: European Voice: Further information within European Sources Online European Sources Online: In Focus
European Sources Online: The Economist
European Sources Online: European Voice
European Sources Online: Financial Times
Further information can be seen in these external links: EU Institutions European Commission DG Press and Communication
DG Competition DG Enterprise
Media organisations BBC News Online
Eric Davies Background and reporting on the week's main stories in the European Union and the wider Europe. |
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