Germany tempted to lock up its industrial jewels

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FRANKFURT, Oct 28 (AFP): Germany's fractious coalition government has an issue both sides agree on-the need to protect key industries, the country's crown jewels, from hostile foreign takeovers.
Several initiatives were floated last week that aimed to head off investors seen to be out only for their own interests, to the point where industrialists have warned against starting a protectionist backlash.
On Monday, leaders of Chancellor Angela Merkel's Christian Democratic Union (CDU) approved a proposal aimed at shielding sectors essential to national security and "strategic infrastructure" from foreign investment funds.
The conservative party's plan was quickly hailed by the center-left Social Democrats (SPD) as a step in the right direction.
A day later, a press report said Merkel was considering setting up a panel to vet foreign investment along the lines of the Committee on Foreign Investments in the United States (CFIUS).
Her office declined to confirm the report.
The measures currently under study target sovereign wealth funds from countries like China, Russia and the oil-rich Gulf states.
They are sometimes suspected "of motives other than the simple profitability of their investment," for example "a technology transfer or strategic and political motives," according to the proposed CDU bill.
Some of the funds have existed for a while but they have become "the new whipping boys of globalisation," said Katharina Gnath, a researcher at the German society of foreign policy (DGAP).
A few months ago, Merkel voiced concern about such funds' ambitions and said Germany should find ways to better protect its key industries.
Highlighted by European leaders in Lisbon, debate on the sovereign funds has resurfaced here as the ruling coalition's partners, divided on many questions, look for one that unites them.
An amendment of the German "law of foreign economics" is being prepared and could take effect early next year which would set up a vetting mechanism for any foreign investor seeking to take a stake of 25 per cent or more in companies deemed strategic.
The question is which sectors would fall into that category? Defence, telecommunications, energy, transport ... the list is potentially a long one.
On Thursday, EU Competition Commissioner Neelie Kroes, on a visit to Berlin, said she took the concern in European countries about state- owned investment funds seriously.
But the European Commission through its president Jose Manuel Barroso has already let it be known that it could see "problems for the integrity of the common market" if EU member countries passed their own legislation on the issue.
The German industrial federation BDI agreed, saying that "a national solution would harm Germany first.