Europe should adopt a common approach for vetting corporate acquisitions by foreign state-controlled investors, Angela Merkel, German chancellor, said on Wednesday, adding that she favoured a US model for joint European action.
So-called “sovereign funds” were often driven by “political and other motivations”, rather than the investment returns that drive privately controlled funds, Ms Merkel said in Berlin.
Ms Merkel indicated she would push the issue up the European Union agenda, listing it among her priorities for the rest of her term, which is due to end in autumn 2009. “This is a new phenomenon that we must tackle with some urgency,” she said.
The chancellor also said she “liked the US procedures” designed to vet possible acquisitions by such funds. “These procedures mean an acquisition is not automatic but allow for checks on the wider implications” of such deals, she said.
German officials told the Financial Times last month that Berlin was looking at setting up an agency modelled on the US Committee on Foreign Investment, or Cfius – an inter-agency panel that can advise the US president to block foreign direct investments. Ms Merkel said she was “worried” that, rather than forging a common EU-wide approach, member states would adopt their own laws based on highly varied standards.
She expressed particular concern that such laws should not follow the French approach, where “a law defines strategic industries in a very broad way”.
“In Germany we have a different approach,” she said, noting that only defence-related companies were covered by such investment protection measures. German officials argue that the French approach raises problems in defining strategic industries outside the defence sector.
In spite of such reservations, Ms Merkel said she discussed the issue with Nicolas Sarkozy, France’s president, during their meeting on Monday. They agreed on the need to “promote discussion on finding an common approach” within the EU.
Concern has grown in recent weeks over a possible shopping spree by Chinese, Russian and Middle Eastern state-controlled funds, which have assets of $2,500bn, according to estimates by Morgan Stanley. The $3bn Chinese investment in Blackstone, the US private equity group, has drawn the attention of German authorities this year.
German government officials said one of Berlin’s preferred solutions would be to amend a 2005 law that gives the right to veto the acquisition by a foreign investor of more than 25 per cent of a defence-related German company.
Ms Merkel said this week that her Christian Democratic party would draw up legislative proposals in the autumn.
She also used her summer press conference to announce a legislative programme for the next 12 months including measures to counter international terrorism.