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Thursday, September 18, 2003

More Waves From Sweden

Hot on my link to Abiola yesterday, more news on Alstom:

The conflict between the EU and France over Alstom intensified when Mario Monti, competition commissioner, won extraordinary powers to decide the fate of the company. After a prolonged debate, Mr Monti's fellow commissioners gave him the right to forbid France from taking a stake in Alstom in what what has become a test case for the European Commission's resolve over industry-distorting government subsidies. Alstom asked for its shares to be suspended on the Paris stock exchange after they headed for free fall in the wake of the Commission's decision and its announcement of an in-depth investigation into alleged government aid totalling €3.18bn ($3.58bn).

"The life or death of the company is now up to Mr Monti," one official said, as the beleaguered company called a board meeting on Wednesday night to "review the consequences of the situation". Mr Monti has five days to hammer out a deal with Paris, which insists the 110,000-strong group must receive €600m of government money this month or else face collapse. If no agreement is reached, Mr Monti can issue an injunction to prohibit France from investing in the group, as long as he has the consent of Romano Prodi, commission president.

The finance ministry issued a statement saying it would work intensively to seek a compromise "to save a large European company and its jobs". But by late afternoon, government officials and many financial analysts appeared to be increasingly alarmed that the room for manoeuvre to find a compromise was extremely narrow. Alstom's banks continue to insist on the government's direct participation in the rescue as the quid pro quo for their continuing support. The Commission sees the battle over France's plans to invest €600m in shares and loans in Alstom as a test of the credibility of its anti-subsidies regime, which has seen state aid to the European Union's manufacturing sector fall from €33.5bn in 1997 to €21.2bn in 2001.
Source: Financial Times

My impression is that this is a belated attempt to face up to the problem of the 'small country' frustration in the face of the 'big country' flouting. This must be one of the lessons of the Swedish vote. But one spectacular decision won't change everything, and meanwhile, it's far from clear what this is all about. It wouldn't have anything to do with off-balance sheet liabilities, would it?

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