Berlin - German Chancellor Angela Merkel's ruling coalition
unveiled Wednesday new far-reaching rules to head off powerful
foreign-owned state-controlled funds going on a shopping spree for
companies in Europe's biggest economy.
Of particular concern to Merkel's conservative Christian
Democrat-led coalition is the threat posed to key German industries,
such as telecoms, banks and energy sectors, by cash-rich state funds
from Russia, the Middle East and China.
The proposals agreed to by Merkel's Cabinet will mean moves from
non-European Union controlled investment groups or companies to buy a
25 per cent or more stake in strategic parts of German industry can
in future be blocked.
Based on a US model, Germany's plans could help to boost the
prospects of EU-wide rules aimed at possibly vetoing the incursions
by foreign investors into sensitive industries.
But Berlin's drive to enhance government regulation of the push by
investment funds operated by foreign governments into corporate
Germany has set the alarm bells ringing in German business.
'Foreign investment brings many advantages such as economic
growth, employment and as a result rising living standards,' said the
general secretary of Germany's International Chamber of Commerce
(ICC), Angelika Pohlenz.
She said that the plan could lead to lower foreign investment in
Germany and trigger limits on German investment in other parts of the
world.
The ICC's concerns were echoed across German business with the
chief of the nation's influential Federation of German Industry
(BDI), Werner Schnappauf saying Berlin's new laws sent 'the wrong
signal for Germany as a place to invest.'
'As the world's leading export nation and a key source of foreign
investment, Germany is heavily dependent on open markets,' said
Schnappauf, adding that foreign investment underpinned more than 2
million jobs in Europe's biggest economy.
A report prepared by the investment house, Morgan Stanley
estimated that the state funds could already control up to 2.5
trillion US dollars worldwide, building to 12 trillion US dollars by
2015.
Last year, the Chinese Government acquired a 10 per cent stake in
the US private equity house Blackstone, which has a key holding in
German-based Deutsche Telekom AG, which is Europe's biggest phone
company.
This followed moves by Russian state bank VTB to carve an interest
in Europe's sensitive aeronautic and defence sector by seeking out a
stake in the European Aeronautic Defence and Space group (EADS),
which is the parent company of the European aircraft maker Airbus.
At the same time, Berlin has spearheaded a push to ensure greater
transparency of the international hedge-fund industry, despite the
reluctance of both Britain and the US to take action to monitor the
1.4-trillion-dollar business.
But analysts said that the risk is that foreign state funds could
use groups based in other parts of the EU to move in on key German
corporations.
Under the Merkel government's plans investors would have to notify
the government when purchasing more than 25 per cent of a major
German company.
While other EU member states have also been mulling over ways to
regulate foreign-controlled funds, the German plan is markedly
different to Britain where London has welcomed the push by wealthy
government-controlled funds to pickup companies in the UK and ruled
out erecting barriers.
USA
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