National business intereststhreaten Franco-German summit

28th May 2004, Comments 0 comments

28 May 2004 , BERLIN - Competing national business interests are threatening to overshadow a summit next week in Berlin between German Chancellor Gerhard Schroeder and French Prime Minister Jean-Pierre Raffarin on creating industrial champions. The meeting between the French and German government leaders is a sign of the concerns in both Paris and Berlin that Europe needs to build industrial powerhouses that are able to compete in a fast-paced global economy with mega-business giants notably from the US an

28 May 2004

BERLIN - Competing national business interests are threatening to overshadow a summit next week in Berlin between German Chancellor Gerhard Schroeder and French Prime Minister Jean-Pierre Raffarin on creating industrial champions.

The meeting between the French and German government leaders is a sign of the concerns in both Paris and Berlin that Europe needs to build industrial powerhouses that are able to compete in a fast-paced global economy with mega-business giants notably from the US and Asia so to protect national industries from foreign corporate predators and to protect jobs.

"The interest on both sides in extending and expanding French- German cooperation on European and international policy matters to industry policy is considerable," said a German spokesman.

While the Franco-German axis has helped to steer Europe's post-Second World War development, including the creation of the euro, a series of key business moves in recent weeks has placed the alliance under strain.

Indeed, plans for next Tuesday's summit come as tensions between the two European allies have been unleashed following a French government push to stitch together a EUR three to four billion bailout for embattled French engineering group Alstom, which competes with giant German electronics group Siemens.

The pressure on Paris-Berlin ties also follows successful moves by Paris last month to orchestrate the creation of the world's third- biggest drug company through France's Sanofi-Synthelabo's takeover of Franco-German-owned rival Aventis.

This week, France agreed to strict European Commission demands clearing the way for securing EU approval for a new state-sponsored rescue plan for Alstom, a symbol of French industrial engineering hauled back from the brink of bankruptcy only last year by a EUR 4.7 billion bailout.

But as a sign of the scale of the problems facing Alstom, the company announced Wednesday a bigger-than-expected net loss of EUR 1.8 billion.

German Economics Minister Wolfgang Clement has already expressed concern that the Alstom rescue might be aimed at hindering a possible takeover by Siemens of parts of the troubled French company's power business.

The drive to save Alstom from bankruptcy was spearheaded by French Finance Minister Nicolas Sarkozy, who vowed to ensure that the engineering group remained in French hands.

Paris' aggressive intervention to head off a takeover of Aventis by Swiss-based Novartis lead to Clement lashing out at what he called growing French intervention in business affairs with Berlin insisting that it would not meddle in the takeover battle launched by Sanofi- Synthelabo.

Both Clement, who has emerged as a leading pro-business advocate in Schroeder's Social Democrat-led Government, and Sarkozy are to join Tuesday's summit, where the shadows of Sanofi-Synthelabo and Alstom will loom large.

France has made no secret of its plans to pursue a policy of creating national champions, with Schroeder earlier this month calling on Germany's big banks to push ahead with mergers so as to create a new German banking global player.

And Siemens, furious that a key rival might be propped up state aid, has been considering mounting a legal challenge to the Alstom financial bailout.

Industry analysts said Paris' decision to agree to EU conditions, which include Alstom forging ties with new industrial partnerships could pave the way for Siemens buying parts of the business.

France however has been quick to emphasise that Alstom has four years to comply with the EU's conditions and insist that the company would not be broken up.

Moreover, Alstom chief Patrick Kron has ruled out a new link with Siemens saying it was not in the interests of the French group's shareholders or employees.

And as an additional sign of the political tensions generated by Alstom, Berlin and Paris appeared to have clashed over whether representatives of Alstom and Siemens would join next week's summit.

German officials said that Paris and Berlin had agreed that both companies would join the summit. The French government has insisted that the companies would not.

DPA

Subject: German news

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