EU states back weaker rules on cross-border takeovers

European Union institutions were at loggerheads yesterday as both the Commission and the ECB took issue with politicians.

EU governments yesterday backed weakened rules for cross-border takeovers that have been 15 years in the making in spite of fierce opposition by the European Commission, EU officials said.

Only days after defying the Commission to bend EU budget rules to please France and Germany, EU states overruled the EU executive Commission and endorsed a compromise text that may offer little to business.

The move is a personal defeat for Internal Market Commissioner Mr Frits Bolkestein, who had drafted and defended a more ambitious proposal to spur cross-border mergers in the EU.

"Half a loaf is better than no loaf," Britain's Secretary of State for Trade and Industry Patricia Hewitt told reporters. "We would have liked to see a more far-reaching directive."

Ironically, the move came on a day ministers in the Competitive Council adopted the proposal for review of merger regulation in the EU.

Competition Commissioner Mr Mario Monti welcomed that move saying it would "provide the European Union with an unrivalled system for vetting mergers and acquisitions in a Union of 25 members".

The new regulations are due to come into force on May 1st next year when enlargement takes place. They introduce some flexibility into the investigation timeframes (although their predictability is unaffected), reinforces the "one-stop shop" concept and clarifies that the substantive test contained in the regulation covers all types of harmful scenarios, he said.

Mr Bolkestein's proposal sought to revive merger activity, by banning common anti-merger defences such as voting caps or dual listing shares with multiple voting rights.

But his ambitious plan was watered down, partly to allow long-term opponent Germany to continue to shield firms such as Volkswagen and Sweden to protect Ericsson.

All countries supported the weakened compromise text, tabled by EU president Italy, apart from Spain, which abstained, EU diplomats told Reuters.

In a separate move, the European Central Bank yesterday said it was seriously concerned about plans from the European Union presidency to make it easier for politicians to change the central bank's leadership.

"This would imply far-reaching changes to the current constitution of the European System of Central Banks, which the Governing Council cannot support," ECB president Mr Jean-Claude Trichet said in a letter to the EU presidency.

In proposed changes to the bloc's draft constitution, Italy has said governments should be able to change the composition of the ECB's governing bodies by unanimous decision, without having to go through the arduous process of changing the EU treaty. - (Reuters)