April 18, 2021

France and Germany want to remove the right of veto in Brussels after the fiasco of the Siemens-Alstom merger | Economy

France and Germany want to remove the right of veto in Brussels after the fiasco of the Siemens-Alstom merger | Economy

The German Siemens and the French Alstom must reverse their project to create a European giant that can stand up to the strength of the Chinese railway industry and compete globally. The ambitious plan to light a company with 60,000 employeescrashed yesterday with the veto of the European Commissioner for Competition, Margrethe Vestager, which considers that they would have a too dominant position in the EU. Paris and Berlin, outraged by the decision, are preparing to launch an offensive to change the competition policy of the EU.

The blockade of the Competition Commissioner angered the governments of Angela Merkel and Emmanuel Macron. The shock could go so far as to wrest from the Commission the last word on the most politically sensitive mergers, such as Alstom and Siemens. The power of veto that Brussels has available for almost 30 years could have the days numbered.

"We must introduce more flexibility in European competition policy, as has been done in macroeconomics with the Stability Pact", Defend French sources. Although there is still no official proposal, the reform would aim to pass the last word on certain mergers to the EU Council of Ministers, a forum in which Germany and France have a proportionally much greater weight than in the Commission.

This formula would equip the European model with the one in force in several countries, including France and Germany, where the Government can revoke or ignore some decisions of the national competition authorities. In fact, the current French minister, Bruno Le Maire, last year it revoked a decision of the French competition authority in an unprecedented measure since that body was declared independent a decade ago.

The highest aspirant to preside over European Comission, the German conservative Manfred Weber, lashed out against Vestager's decision to stop the operation. "It's a mistake," he said. The night before, during the presentation in Brussels of Annegret Kramp-Karrenbauer, the successor of Angela Merkel at the head of the CDU, Weber advocated "looking at the competition not only from a European point of view, but globally". A project that was seconded by Kramp-Karrenbauer herself.

Changes in billing thresholds

Internal sources of the Commission assume that the next president will undertake the reform of a regulation that, according to Berlin and Paris, does not allow the birth of "European champions" that can compete with the companies of USA Y China. The Commission itself reflects for months on a possible reform of the billing thresholds that force to notify mergers to Brussels. But this is a relatively minor change in comparison to what is now posed by Germany and France. And, in addition, the objective is to give more power to Brussels no less.

The Commission intends to lower the thresholds in the digital economy sector so that the Commission does not escape operations of the large platforms (from Facebook to Google), whose purchases of startups they are almost never reviewed even though Brussels suspects that they are having a great impact on competition because they reduce innovation. The platforms buy the small companies as soon as they detect a potential rival.

Berlin and Paris can support this change. But they want to go much further. And subjecting competition policy to political control that allows it to be turned into an instrument also at the service of the EU's industrial and commercial policy.

"It is very dangerous," warn competition department sources, who fear contaminating political arbitrariness procedures based on rigorous technical criteria and subject to judicial review by the European Court of Justice. These sources emphasize the risk of intermingling industrial policy with that of competition. "In the first place, you do not know if the bet for a presumed champion will be good," said the sources. "And in the second place, the appearance of these giants can result in more expensive prices for the companies that are their clients, so they earn on the one hand, but lose on the other."

That has been the case of Siemens and Alstom, a file in which Brussels claims to have received a lot of critical comments from customers. The European employers' association of infrastructure managers wrote to the Commission in writing to warn of the risk of price increases if the two main suppliers of the sector merged.

Four vetoes since 2014

But Paris and Berlin are convinced that the current system, which grants full powers to Brussels, submits the control of operations to a technical review with little political bias. An apparent asepsis that, according to these capitals, leaves Europe at a disadvantage compared to much more interventionist economies such as China or the USA by Donald Trump.

"We are not self-complacent," they defend themselves in the Commission. And remember that the rules have been reformed and a continuous evolution is maintained. "It is increasingly common that we analyze mergers based on a European and not a national market analysis," says the agency, referring to a criterion that allows companies to reach a much greater dimension without raising competition problems.

But the truth is that the last major reform took place during the mandate of Mario Monti (1999-2004) as Commissioner of Competition. And it came after the tremendous blows made by the European Court, which revoked the veto of several mergers consecutively.

Since 1990, the Commission has only banned 27 mergers of 7,260 notified. For Vestager, the railroad megafusion veto would only be the fourth since it took over the portfolio in November 2014. But for Berlin and Paris, it is the last straw for a surveillance system that they consider to be outdated, inflexible and indifferent to the new reality of the world economy, where European national companies, however large, can be swallowed up by the gigantic Chinese companies.


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