Business | Economy
Germany acts to halt 'giant locusts'
Germany's cabinet is expected to approve a far-reaching new law this week to stop "giant locust funds" from Russia, China and the Middle East from launching takeover raids on the country's prized industries.
- The Daily Telegraph Group Limited, London 2008
- Published: 23:32 August 19, 2008
Berlin: Germany's cabinet is expected to approve a far-reaching new law this week to stop "giant locust funds" from Russia, China and the Middle East from launching takeover raids on the country's prized industries.
The controversial measure will enable Germany to stop foreign investors from outside the European Union buying more than 25 per cent of any company when "public order and security" are at stake.
The wording creates an elastic definition that goes far beyond the current law, which is restricted to the defence industry.
The proposals have set off a storm of controversy and raised fears that the country is drifting towards protectionism. The German Chamber of Trade and Industry (DIHK) has been critical of the draft law, warning that it risks provoking retaliation and is at odds with the country's interests as the world's top exporting nation.
"This will damage Germany's economic standing. The controls should be restricted to questions of national security. In the face of such regulations, any financier is going to think twice about whether he should be investing here at all," said the group's chief, Axel Nitschke.
'Very modest'
Michael Glos, the economy minister, said foreign investors had nothing to fear from the law, which is to be discussed by Chancellor Angela Merkel's Left-Right cabinet tomorrow. "The new rules are very modest and only allow government interference in foreign investment projects in very few cases," he said.
Merkel has been wary of moves by Russia's state-controlled banks and companies trying to buy shares in strategic industries. She issued a blunt warning to Prime Minister Vladimir Putin (then president) that Berlin would not tolerate moves by VTB Bank to acquire a large stake in the Airbus mother-company EADS. She also stopped Russia's Mishkonzerns Sistema from taking a slice of Deutsche Telekom in 2006.
Validation
Her suspicions have been validated by the hard-nosed behaviour of the Kremlin, which has repeatedly used its economic tentacles to pursue its Great Power strategic ambitions.
Russian billionaire Alexander Lebedev said Berlin was well advised to shut the door on secretive wealth funds and state banks, warning that they cannot be trusted if they come from corrupt regimes that refuse to play by established rules. "In Germany's place I wouldn't sell anything to a Russian or a Chinese state fund," he told Welt am Sonntag.
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