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Wednesday, March 01, 2006

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EDITORIAL
 
Economic nationalism gains pace
Paul Betts from Paris
3/1/2006
 

          THE French concept of "economic patriotism" appears to be winning a growing number of converts across Europe.
After Poland sought to block UniCredit's merger with HVB and Luxembourg's rush on new takeover legislation in an attempt to scupper Mittal Steel's bid for Arcelor, it is now the turn of Spain to wave the protectionist flag in the face of Eon's bid for Endesa.
Yet this revival of economic nationalism in continental Europe is causing increasing concern in business, with companies worried this could have serious implications for their international expansion strategies.
One leading European executive said recently businesses were anxious to seize opportunities offered by a more open European market. But this is being threatened by national attitudes.
"Should Spain block Eon's bid, it will simply give other governments an excuse to do the same, instead of allowing business to drive change in Europe," he said.
Spanish companies have been particularly dynamic in their efforts to expand, as reflected in the recent rash of Spanish takeovers of UK telecom and banking groups and now Grupo Ferrovial's proposal to bid for UK airport authority BAA.
But Spanish companies have also been thwarted in their ambitions to expand elsewhere in Europe by protectionist barriers. As a result, many have invested heavily in Latin America, where they are today perhaps over-exposed.
Eon's bid for Endesa, according to Spanish executives, could prove a defining moment for the Socialist government in demonstrating, in the words of one businessman, "whether it wants to play the European game or run the country like a banana republic".
However, he added the "European game" also implied other countries reciprocated the access given to their champions into -- the Spanish market -- so far among the most open and liberal in Europe, allowing large sectors of its economy, such as the car industry, to be in foreign hands.
But José Luis Rodríguez Zapatero, the prime minister, faces a dilenima. For the Endesa affair has from the beginning been a domestic political battle between the Socialists and their Catalan nationalist allies versus the right-wing opposition.
The opposition is now using the Eon bid to increase pressure on the government, while Mr Zapatero must balance the need to show his administration's European and free-market credentials with its commitment to creating a national energy champion.
After initially waving the threat of using its "goldenshare" in Endesa to thwart Eon, Madrid adopted a more cautious stance, saying it did not intend exercising it, while, insisting it would defend the counliry's" national interests".
This implies it would welcome Gas Natural returning with a better offer for Endesa, perhaps backed by new allies. Enel, the Italian electricity utility, confirmed lately it would consider-joining Gas Natural in a bid or acquire Spanish electricity assets that could eventually be sold off.
.....................................
FT Syndication Service

 

 
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