Verheugen warns off sovereign-fund raiders

Günter Verheugen, the European commissioner for enterprise and industry, is backing moves to bolster defensive measures against the takeover of European companies by increasingly powerful government-controlled funds from countries like China and Russia.

The European Commission plans after the summer break to address French and German concerns about the involvement of politically motivated foreign funds in sectors of strategic importance.

"I think the question that must be discussed is how we can defend our strategic interests without violating our most important principles of the freedom of movement of capital in the internal market. I think it is an important issue," Verheugen told European Voice. Fears over the financial clout of so-called sovereign funds have been stoked recently by contributions from the investment arms of the Chinese and Singapore governments in UK bank Barclays’ revised bid for Dutch counterpart ABN Amro.

Verheugen implicitly criticised Peter Mandelson, the European commissioner for trade, who suggested at the weekend in an interview with the Italian daily Il Sole 24 Ore, that golden shares might be a viable way of protecting key industries. The commissioners in charge of such matters, Verheugen pointed out, were Neelie Kroes, the commissioner for competition, and Charlie McCreevy, the commissioner for the internal market.

"We are a college and this is not my area of responsibility. I am affected, but it would simply violate the rules if I made statements here. I would like to know what the commissioners in charge really believe," he said.

He did note, however, that the EU was entitled to protect its interests under World Trade Organization rules and that "the Americans are using those instruments in a very broad way. It is not so unusual".

German Chancellor Angela Merkel is said to be keen on the idea of a vetting body, modelled on America’s Committee on Foreign Investment. The US, which sounded the alarm about sovereign funds last month, has called on the International Monetary Fund and the World Bank to draw up a set of best practice guidelines for cash-rich state-backed funds.

Speaking to journalists on Tuesday (24 July), Mandelson addressed the issue again, clarifying his position with a reference to the Barclays case. The sovereign funds’ interest in the ABN Amro takeover was, he said, "by all accounts commercial".

Mandelson appeared to be in line with the views of Alistair Darling, the UK chancellor of the exchequer, who said yesterday (25 July) that the UK would be maintaining its commitment to free trade and open markets.

Mandelson said: "Investments of this sort can be in the interests of the European banking sector. What’s the objection? None as far as I can see, particularly if it will help European financial services gain a bigger foothold in Asia." He added: "There is nothing intrinsically wrong about these state-controlled investment funds or banks. They are a beneficial way of re-distributing surpluses and increasing capital flows. Of course we want foreign investment: it’s a sign of confidence in our markets and future growth."

Mandelson said that foreign investment controls might be appropriate in the energy sector to ensure compliance with forthcoming EU legislation obliging companies to separate energy production from energy distribution. He also said that moves by the French and German governments to create a golden share at defence firm EADS were "legitimate to protect control...from outside buyers seeking seats on the management board through purchases on the open market".

Günter Verheugen, the European commissioner for enterprise and industry, is backing moves to bolster defensive measures against the takeover of European companies by increasingly powerful government-controlled funds from countries like China and Russia.