France claims big win against Vestager in battle for champions

Brussels is shifting its priorities quickly toward industrial heavyweights.

The French are popping the Champagne corks.

They think they have achieved the impossible, and have pushed EU competition chief Margrethe Vestager to revise her hallowed rulebook to allow the creation of European industrial champions that can rival China.

Ever since Vestager early this year blocked a mega merger in the rail sector between France’s Alstom and Germany’s Siemens, Paris and Berlin have mounted a determined push to tear up EU competition rules, which they say stand in the way of industrial heavyweights that can challenge China and the U.S.

The main Franco-German argument is that Brussels needs to focus less on European consumers and prioritize the survival of EU companies on the international stage.

After months of officials in Brussels dismissing the French and German offensive and saying the rules were fine, Vestager performed an unexpected volte-face this week and announced that she was going to review the way that Brussels defines markets for competition cases.

For the French, this is a key sign that the new Commission under President Ursula von der Leyen is shifting its focus away from the intricacies of antitrust law to a far more sweeping industrial strategy. “I welcome statements by Vice President Vestager. They show awareness of the need to change competition policy to face the United States and China,” France’s Economy Minister Bruno Le Maire was quoted as saying by the French newspaper Les Echos.

In a similar vein, French lawmakers in the liberal Renew Group allied to President Emmanuel Macron in the European Parliament saw Vestager’s announcement as a significant climbdown.

“It was about time!” tweeted MEP Christophe Grudler. “European champions out to conquer the world, it’s not old fashioned!” Another close Macron ally in the Parliament, Nathalie Loiseau, boasted that Vestager’s backtracking was evidence of a push from French liberal parties “that is becoming reality.”

Germany’s reaction was less effusive than France’s but the economy ministry still welcomed the decision and said that it would take part “constructively” in the review. “The aim is to make Europe strong in global competition with a view to globalization and digitization,” the ministry said.

Vestager herself and her officials at the EU’s competition department, which has long seen itself as a rules-based bastion free from interventions from national capitals, are all adamantly denying that they have been forced into a change of direction.

Speaking at a POLITICO event, Vestager pushed back against the idea that the French were getting exactly what they wanted, and argued “Siemens-Alstom is a very poor example” of why the review was being conducted.

Taking the same approach, Hans Zenger, an economist in Vestager’s department, warned the French and Germans “not [to] expect a revolution out of such a process” and stressed that the review will only consist of updating the rules in order to reflect the Commission’s current decisional practice.

Despite these protestations from the Commission, however, both the French and Germans can take heart from early competition decisions from the new Commission that all seem to be going in exactly the direction they want, putting their interests and those of their leading industries, from telecoms to cars, at the heart of the agenda.

Vestager this week pleased the French and Germans by announcing that Europe “could easily have more [telecoms] mergers which are cross-border.”

That has been one of the key areas where EU ministers have been seeking a soft line from Brussels, particularly as some in the telecoms sector predict a potential merger between France’s Orange and Germany’s Deutsche Telekom.

In more good news for the Franco-German juggernaut, the EU also on Monday cleared a pan-EU battery scheme involving public funding to French and German champions such as BMW, PSA Group and BASF.

The €8 billion project has been approved as a so-called project of common interest, which gives Brussels the leeway to wave through public support if projects are aimed at promoting cross-border links and meeting bloc-wide targets.

Last week, Vestager also made a contentious decision to approve public subsidies to German bank NordLB. This triggered criticism from groups as diverse as Italian lawmakers, who accused the Commission of double standards, to the Financial Times, whose editorial board said they would welcome a legal challenge to the NordLB case.

Europe’s new industrial strategy is only expected to be launched formally at the beginning of March, but advocates of a shift to a doctrine of European champions think that the party has already started.

Jakob Hanke contributed reporting.

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