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Last Updated: Thursday, 9 March 2006, 11:13 GMT
EU warns over state protectionism
Charlie McCreevy, EU Single Market Commissioner
Mr McCreevy says upholding the principle of a single market is vital
State efforts to protect firms from foreign takeovers are illegal, EU commissioner Charlie McCreevy has said.

Mr McCreevy said so-called economic patriotism - the subject of a simmering row in Europe - was discriminatory and incompatible with European law.

His remarks represent a shot across the bows for the French government, which has backed the controversial merger of energy firms Suez and Gaz de France.

Brussels is examining events leading up to the announcement of the deal.

Single market

Critics have claimed the 72bn euro ($86bn; 49.5bn) tie-up is primarily designed to keep Suez in French hands.

The firm is a takeover target for Italian firm Enel.

It is illogical to start talking about your own national economic situation or economic patriotism
Charlie McCreevy

French Prime Minister Dominique de Villepin has strongly backed the deal, saying that French ownership of businesses in key sectors of the economy is vital to national interests.

Paris has given businesses in 11 sectors of the economy - including data protection and energy - added legal protection, making it harder for them to be bought by foreign companies.

Mr McCreevy said this policy was out of date and anti-competitive.

"When you talk about the single market you would be talking about Europe as a whole," he told the BBC.

Gaz de France headquarters
Gaz de France's proposed merger with Suez sparked fury in Italy

"It is illogical to then start talking about your own national economic situation or economic patriotism or whatever the case may be."

European laws protect the free movement of capital, allowing companies to invest money where they choose.

Suez and Gaz de France said they were in talks about a potential merger for several months, predating Enel's interest in the French firm.

Following complaints from Italian ministers, Mr McCreevy has asked the two firms to explain the sequence of events leading up to the announcement of the merger last month.

Tide of nationalism

Separately, a senior International Monetary Fund (IMF) official has warned that a rising tide of economic nationalism in both Europe and the US is threatening co-operation between countries.

Speaking in New York, the IMF's chief economist Raghuram Rajan said "multilateralism was in retreat everywhere".

US politicians are currently trying to block the acquisition of British shipping firm P&O by Dubai Ports World - which is based in the United Arab Emirates - on national security grounds.

EU presses Paris on energy merger
03 Mar 06 |  Business
Barroso warns of closed markets
01 Mar 06 |  Business
French energy deal irks Italians
26 Feb 06 |  Business

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