The partial, real or apparent reassurance surrounding Mittal Steel's take-over bid for Arcelor certainly has some positive aspects to it. But it is also a shame that it has had the effect of stifling the debate on the financial, industrial and stock market repecussions of globalisation (see this section in our bulletin 9124). Whatever the result of the operation, the questions posed have still not gone away and have to be answered even if (indeed, especially) if divergences within the EU are to the fore. Some believe that around ten operations of this kind occur every year. Others consider that the affair is highly political.
The two interpretations. I am not going to interpret the two theses in question in a subjective way but rather summarise them using the words employed by their supporters. In presenting the first thesis, here is the declaration of the most qualified person available, Ernest-Antoine Seillière, president of the European employers organisation, UNICE, “It is simply a take-over bid by a European company, Mittal Steel, for another European firm, Arcelor. Both of them are operating in the same sector. Mittal Steel is based in the Netherlands, its Executive Officer is of Indian descent and has British nationality. Ten or so operations of this kind occur every year. It therefore has a very traditional character and simply has to respect European rules regarding competition problems that may possibly arise. Basically, it will be up to Arcelor shareholders to decide whether their shares should be sold to Mittal Steel or not and it's up to the Heads of the two opposing groups to convince them”.
And here is the other interpretation, “This affair has created a lot of emotion because it involves two very strong symbols. First of steel, which has been at the heart of European industrial power for two centuries. And then Mittal Steel, the group symbol of globalisation. The family which this group belongs to is Indian and it demonstrates the new power of the emerging countries but the group has become British, Dutch and American. Subjectively, the emotion created by the operation is completely legitimate and understandable by both the political community and public opinion”. “To whom can this second description of the affair be attributed? To the very same person, Ernest-Antoine Seillère, UNICE Chairman, who in this way sought to present the two “levels of analysis”. And in an effort to complete his thoughts he added, “These events, and it is serious, clearly demonstrate the incomplete character of European construction, the shortfalls of its governance and its vulnerability, as well as the capacity of States that still remain limited”.
Key questions. Neelie Kroes the Commissioner for competition confirmed the limitations of the European institutions to respond. She explained that she would only be able to examine the “competition” aspects of a possible merger (the possibility of an abusive dominant position or agreement). Günter Verheugen, Commission vice president and the person in charge of industrial policy pointed out that the policy the Commission is gradually creating aims to produce the framework conditions for European companies to become the most competitive, free from interventionist temptation, as the Commission ought not to interfere in the private affairs of two companies. Commission vice president Jacques Barrot, nonetheless, appealed for a “European industrial strategy, and more pro-active European solidarity”. Some political forces are also calling for more power to be given to the public authorities at either European or national level. Dominique Straus-Kahn (often cited as a potential candidate for the presidency of the French Republic next year) deplored the weaknesses in European protection against hostile take-overs and explained that Arcelor should not “be the prey of the Indian predator”. This language leaves no doubt about how he feels about the matter. The weak point in the French and partly Luxembourg arguments (see this section already quoted in bulletin 9124 on the declarations of Jean-Claude Juncker and François Loos) is the difference in language when hostile take-overs are made by French companies and when Luxembourg banks seduce multinationals into being based in the Grand-Duchy.
All this is but an introduction to the fundamental questions being posed. They are quite similar to those contained in the passionate debates a few years ago on corporate governance and globalisation of the financial and stock markets which set European milieux alight at the time of the Bolkestein directive, not the one on services which is still being discussed, but the one on take-overs. This will be my subject for tomorrow. (F.R.)