France on Wednesday unveiled new weapons in its arsenal for protecting French companies against on Wednesday foreign bidders, as its politicians came under fire over their rising protectionist rhetoric.

Dominique de Villepin, France’s prime minister, outlined fresh plans to boost employee share-ownership and to use the Caisse des Dépôts et Consignations (CDC), the biggest institutional investor in the CAC-40, into a domestic buffer to ward off foreign takeovers.

Mr de Villepin said: “We need to consolidate the capital of companies and protect them against hostile operations.” He said that “fragmented share capital” was a big risk for the independence of French companies.

CDC manages about €220bn ($261bn, £150bn) of state pensions. It is a
leading shareholder in Schneider, Accor, Saint Gobain, Michelin, LVMH and Veolia Environnement.

CDC has been branded as the “armed wing” of the government, a reputation boosted in 2003 when it subscribed to rescue rights issues at France Telecom and Alstom, in support of state-backed bail-outs. Paris wants it to act as a counterweight to short-term institutional investment strategies.

Mr de Villepin’s remarks came as José Manuel Barroso, the president of the European Commission, urged governments to stop undermining the European single market with “nationalist rhetoric”.

Mario Monti, former EU competition commissioner, warns in Thursday’s FT that economic nationalism is putting the single market in danger and jeopardising the euro.

France has provoked outrage in Italy over support for plans to merge state-controlled Gaz de France with Suez which will allow the Franco-Belgian water and power group to ward off a possible hostile bid from Enel, the Italian utility.

Giulio Tremonti, Italy’s economy minister, called on Brussels to intervene. “If the Commission does not act, my advice would be for it to close down because of a failure to meet its mandate.”

Mr Barroso, who spoke to Mr de Villepin on Wednesday, said: “We cannot make progress if there are barriers between member states.”

Paris has been increasingly accused of pursuing a protectionist agenda, particularly after its outspoken opposition to Mittal Steel’s €18.6bn bid for Luxembourg-based rival Arcelor.

Mr de Villepin said: “There is no reason that our American, Japanese or British friends should have tools that we do not. All I want is for France to fully play its role in globalisation and that our country can defend itself with all the tools needed to succeed, within the respect of the rules, European or international.”

Mr de Villepin also outlined plans to boost employee shareholdings by allowing companies to issue free shares to staff, make profit-sharing share schemes more advantageous, transform overtime into shares, and create multi-company profit-sharing share schemes for specific projects.

France is also granting companies the right to use “poison pill” defence strategies to protect themselves from hostile bids.

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