07 June 2006

The Guardian: Chirac takes a swipe at advance of NYSE into Europe

Jacques Chirac, the French president, threw a huge political spanner yesterday in the works of the agreed € 8bn takeover of Euronext by the New York Stock Exchange by openly backing an all-European merger with Deutsche Börse instead.

The president's astonishing intervention, made at a Franco-German summit in Rheinsberg with a bemused chancellor Angela Merkel, reflects widespread concerns within France - home of the notion of economic 'national champions' - about an American putsch on a key European financial market.

'Not only is it not yogurt, but Euronext is not even a French company - it's Dutch,' a source close to the pan-European exchange linking the Amsterdam, Brussels, Lisbon and Paris bourses said - referring to Mr Chirac's protectionist campaign to prevent the yogurt maker Danone from being taken over by America's PepsiCo last year.

Mr Chirac, a veteran centre-right politician who stridently favours state intervention to promote French and European industry, hastily conceded that politicians had little power to block the deal between New York and Euronext.

'For my part, I do not hide the fact that I favour the Franco-German solution for reasons of principle and I would regret it if this solution were not to be adopted in the end,' the French president told journalists, echoing earlier remarks by Reto Francioni, Deutsche Börse's chief executive.

'Even if we have few means of intervening ... I would like it if an agreement could be struck between Frankfurt and Euronext, an agreement that is as balanced as possible and [could] maintain a minimum of activities and business in Paris.' But he conceded: 'Euronext is not France - it is four exchanges together.' His spokesman conceded further that only two of Euronext's nine executive directors are French.

Ms Merkel, who is trying to distance her grand coalition government from the interventionist stance of her predecessors on both right and left, said: 'We are always of the opinion that it is good to build up strong economic units within Europe. I have watched the whole thing with interest but am also aware that this is purely an economic decision and politics should take a step back.'

The comments came as Jean-François Théodore, Euronext chief executive, and other directors arrived in Milan to hold talks with the heads of Borsa Italiana about a proposed merger. Adding the Italian exchange to the Euronext group would increase the European stake in the final NYSE tie-up from 41% to 47% and add another European seat to the enhanced board, giving it 10 to New York's 11.

Mr Francioni, who plans talks with his own shareholders and those of Euronext in Paris later this week, said the merger with the NYSE 'would be a bad signal for Europe'. He told Handelsblatt, the German daily: 'We don't need less America but we do need more Europe.' The Börse chief, who said a merger with Euronext would create a 'European powerhouse,' insisted that it would integrate EU financial markets and increase the efficiency of its capital markets. 'The debate about the consolidation of Europe's bourses has quite clearly a European-strategic and, therefore, political dimension ... and I know that politicians see this relevance - on both sides.'

Mr Théodore has tried to address misgivings about the NYSE merger by insisting that it must be approved first by US and European regulators. The remit of the US financial watchdog, the Securities and Exchange Commission, would stop at the eastern seaboard of America and the draconian Sarbanes-Oxley corporate law would have no writ in Europe. He has also emphasised that the balance of power between European and American executives cannot be altered, including by major acquisition, unless two-thirds of directors and 80% of all shareholders agree.

Euronext has so far rejected Frankfurt's merger proposals, arguing that the Börse's offer is inferior in value and savings and would demolish its own federal structure in favour of a centralised model. It would also centre too much executive power and trading business in Germany while keeping the Börse's 'vertical silo' of trading, clearance and settlement.
By David Gow

© The Guardian