Via Financial Times

Germany’s economy minister Peter Altmaier had a warning this week for foreign investors seeking to exploit the deepening coronavirus crisis to snap up Germany’s most strategic companies.

“I say to all those people in hedge funds and elsewhere who are looking forward to acquiring one or the other [German firms] on the cheap — make no mistake, we are determined to stand by our companies.”

Ursula von der Leyen, president of the European Commission, conveyed a similar message in a speech addressed to EU member states on Wednesday. “You should use all options to protect critical European companies from foreign takeovers or influence that could undermine our security and public order,” she said in a tweeted video.

The coronavirus pandemic, which has brought economic activity in large parts of the EU to a near standstill, is jolting governments into unprecedented action. And as it spreads, it is triggering a new tone of economic nationalism, with countries awakening to the realisation that the virus and its aftermath could put some of their most valuable companies in danger.

Politicians are responding in different ways. Ms von der Leyen is urging EU member states to better screen foreign investments, especially in areas such as health, medical research and critical infrastructure. 

Guidelines which will be put to EU leaders at their video conference later on Thursday urge countries that lack a mechanism for vetting foreign investments to acquire one. Member states need to be “vigilant” and use all the tools at their disposal to ensure that the crisis doesn’t trigger a “loss of critical assets and technology”.

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Mr Altmaier has gone further, setting up a €100bn bailout fund that will take equity in struggling German companies in exchange for injections of cash, part of a massive economic rescue programme that will entail about €150bn of new borrowing.

It is a significant deviation from German economic orthodoxy, with its “ordoliberal” commitment to competition and the free market.

But some business leaders are demanding even more radical interventions by the state. Geoffroy Roux de Bézieux, head of Medef, the French employers’ federation, suggested this week that Paris should nationalise companies that have been floored by the crisis.

“We must not have any taboos on the subject,” he told Franceinfo. “The state will indeed have to be there, if necessary, to rescue [stricken] companies.” 

The new protectionist mood is, in many ways, understandable. European countries have been shocked at the extent of their reliance on imported medical supplies from Asia. The dire shortage of protective suits and breathing masks has reinforced calls for import controls: and closing borders can seem a sensible response to the spread of the virus.

Fears have also been growing that critical infrastructure, especially in healthcare-related industries, might end up in foreign ownership — as the case of CureVac, a Tübingen-based biotech company working on a vaccine against coronavirus, has shown. The German government has been seeking ways to ensure the company stays in Germany, after reports that the US was trying to lure it with large offers of cash. 

In such a febrile situation, even those who normally abhor government intervention in the economy have welcomed the emergency measures unveiled by Mr Altmaier this week, particularly the new bailout fund.

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“It’s an appropriate expansion of the state’s toolbox for managing a crisis like this,” said Michael Hüther, director of the pro-market German Economic Institute in Cologne.

The state effectively nationalising troubled companies contravenes free market principle, he said. “But in this crisis, unusual questions arise. And when you’re looking for answers, you can’t a priori exclude things that seem questionable from an ordoliberal perspective.”

Mr Altmaier’s “economic stabilisation fund” is, in fact, the revival of an old idea. Last year, he floated the creation of a state investment fund that would take temporary ownership of companies with technology “crucial to Germany’s future competitiveness” that were threatened with a foreign takeover. The proposal was prompted by the 2016 sale of Kuka, Germany’s leading robotics group, to the Chinese appliance maker Midea.

Nothing came of the state fund idea then, but now it has emerged as the centrepiece of the government’s coronavirus response.

Some, such as the Bavarian prime minister Markus Söder, would like to go further and ban foreign takeovers of German companies altogether. “If at the end of this crisis the whole Bavarian and German economy ends up in foreign hands, . . . then it’s not only a medical crisis — it’s a complete change of the global economic order,” he said. “And we have to guard against that.” 

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Meanwhile, some think the crisis should prompt a complete reappraisal of the way the globalised economy works, with a tighter focus on ensuring that in future, all goods considered strategic are produced at home. 

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French president Emmanuel Macron said in a speech earlier this month that the world had to “question the development model” which it had been pursuing for decades and which was now “revealing its flaws”. “What this pandemic shows is that there are goods and services which must be placed outside the laws of the market,” he said. 

Bruno Le Maire, France’s finance minister, spelt out what that meant on Tuesday. “In the long term we cannot depend on Asia, on China for goods that are strategic for us, whether in the aerospace or medical sectors, or in other supply chains,” he said.

Some business leaders are, however, horrified by such rhetoric — among them, Ola Källenius, chief executive of Daimler. The crisis had shown how vulnerable global supply chains were, he told Der Spiegel. “But a world without a global division of labour would be less successful,” he said. Autarky “would be the wrong path to take”. “We have to be realise what led to the growth of the past few decades — and defend it,” he said. 

Additional reporting by Daniel Dombey in Madrid and Victor Mallet in Paris

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