European Comment: Don’t forget why Yukos matters

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Well, would you go back? After the treatment meted out to Yukos, any executive in whom public prosecutors were showing an interest could be forgiven for hesitating before returning to Moscow.

There is a tendency to write off Yukos's fate as an isolated case. President Vladimir Putin, it is said, has convinced investors his vendetta against Mikhail Khodorkovsky, the oil company's majority owner, will spread no further. And the booming Russian economy is simply too attractive to resist.

That is short-sighted. As Andrei Illirionov, Mr Putin's independent-minded economic adviser, remarked to the FT last month, the country risks jeopardising growth by drifting away from market reforms. If it were not for oil prices and other favourable external factors, the economy would be shrinking, not growing as it did last year by more than 7 per cent.

The Kremlin's use of the legal system to crush Yukos cannot easily be separated from the slow pace of liberal reform. Mr Putin knows he needs a strong economy to be a big global power but thinks this can be built through greater state control. He is wrong, as a fall in the oil price might one day make plain.

Don't write off families

Just when Germany is looking to family-owned businesses as an island of stability in a scary world of restructuring by corporate giants, some families are heading for the exit. They are taking advantage of stock market recovery to sell out of sectors in which ownership is becoming more global.

The Röchling family is to sell its 42 per cent stake in Rheinmetall, the defence group, held since 1956, to institutional investors. Recently the Birkel family sold a stake in Beru, the car parts maker, to BorgWarner of the US, while last month the Lenz family sold 43 per cent of Ed Züblin, the builder, to Walter Bau. Analysts said that, with a bigger free float, Rheinmetall would be better able to take part in defence consolidation .

These sales should not be taken as a sign of the death of family businesses. Germany remains hugely dependent on its Mittelstand.Deutsche Börse, the Frankfurt stock exchange operator, is planning a new German entrepreneurial index for medium-sized companies.

Some Germans see the Mittelstand as a haven of conservative management. In reality, medium-sized companies often face similar pressures to bigger groups - especially in industries where there is international consolidation.

But family ownership still has strengths. Family businesses tend to look to the long term and manage balance sheets cautiously. They remain common in countries from the US to Italy and France and, if entrepreneurial conditions are right, they are where future growth is most likely to come from.

Belgian banking jokes

The English like telling Irish jokes; the Italians German jokes; and everybody likes telling Swiss jokes. As for European bankers, they are joining the French in their predilection for Belgian jokes.

For were it not so serious, the monumental mess surrounding Dexia's merger attempts with Italy's Sanpaolo IMI would look like a Christmas pantomime. What should have led to Europe's largest cross-border banking merger has again shown the difficulties of consolidating the European industry.

The Franco-Belgian group's management will make a last-ditch attempt on Sunday to persuade its dissident Belgian shareholders to reconsider their opposition to the deal. The Italian management will do the same on Monday with its biggest shareholders - a banking foundation and Spain's Santander, both irritated that they were not informed about the merger talks. The chances of success are slim to non-existent.

The net result is to expose the two groups' weaknesses. Dexia's chairman has admitted the bank is now vulnerable to hostile bids. As for Sanpaolo, which sold its public works financing arm Crediop to Dexia five years ago, why now agree to a merger except to underline its own insecurity?

The shareholders have hardly done their banks a service. But the respective managements must assume the greater blame for mishandling the affair. At least one person should be pleased. Antonio Fazio, the protective Italian central bank governor, will not have to cast his veto. The shareholders are doing the job for him.

european.comment@ft.com

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