The European Union would be great, if only France was not part of it. Despite what one might think about the EU, often described as a French toy, Paris is most effectively countering every effort to promote a true integration of the European internal market. It all began with the long-standing opposition to liberalizations in key sectors, such as energy, that resulted in a weak implementation of market opening. Then it was the Bolkestein Directive’s turn – the directive, that was aimed at liberalizing services throughout Europe, was dramatically revised by the EU Parliament, and its impact was much softened. Again, French MEPs played a key role in the neutralization of what might have been a beneficial revolution for European consumers.

The latest move is the announced merger between the French company Suez and the state-owned natural gas giant Gaz de France (Gdf). Behind the merger is the intention to stop a bid that the Italian electricity utility Enel was considering on Suez. Ironically, Enel is not interested in the French assets of Suez – instead it wanted to gain control over Belgium’s Electrabel, that is owned by Suez. Yet despite shares usually going to the highest bidder, the French government apparently cannot tolerate a non-French company’s bid for Belgium’s main energy supplier.

The Suez-Gdf merger was revealed by France’s Economy Minister Thierry Breton. Speaking on television, Mr Breton and French Prime Minister Dominique De Villepin said the merger would strengthen “the global industrial vocation of our country.” They did not mention the attempt to stop Enel’s hostile bid, but as a matter of fact the decision was urgently made after Enel’s CEO Fulvio Conti showed an interest in acquiring Electrabel.

There are several anomalies in the decision, beyond the suspicious timing. First, Gdf is more than 80% owned by the French state – to the point that it can hardly be described as a private company. Therefore it follows a political logic rather than an economic one; it takes steps not just because they improve economic efficiency or create value to shareholders or help to deliver a better service to consumers, but also – maybe mostly – for political reasons. For example, it is going to buy stakes in Suez not because it is willing to increase its market share in the French gas sector (which it already controls for 80%) or because it wants to enter the water or waste market, where Suez is active. Many Belgians are convinced that the French government wants to absorb Suez in order to control Belgium’s energy supply. The French government, however, says it just wants Gdf to acquire Suez in order to prevent Suez from becoming Italian, whatever that may mean.

Secondly, the merger will require a change in the French law. So far the government is required by law to own a minimum of 70% of Gdf shares. The merger will cause a relative decrease of the government’s stake in the new, bigger company. Mr Breton said the government will be pushing for a vote in the Parliament to allow the merger in the next few weeks. However the vote will go, the government will maintain a majority share in the merger – so what we are facing is a de facto nationalization of a formerly private company. Ironically the merger is opposed by trade unions (that tend to be against foreign bids too) on the basis that the merger may lead to job cuts.

The government endorsed decision will have several consequences also in other European countries. In Italy there is a growing demand to close the market against the French – and supposedly against other countries, even within the EU, who are not willing to grant reciprocity. Unfortunately, reciprocity is often a Trojan horse to shelter a country from foreign competition. It is no surprise that some of the proponents of reciprocity in Italy have been opponents of the European economic integration; but the French move strengthens anti-market positions rather than giving momentum to those favoring a more open common market in Europe.

Likewise, Spain is looking closely at what is happening in France. Last week the German company Eon made a friendly bid on Spain’s Endesa. Spanish President José Luis Zapatero said he will find a legal way to prevent the bid. While initially EU Competition Commissioner Neelie Kroes replied that the Commission will not allow anti-German discrimination, now Zapatero’s stance is stronger – as he can count on a powerful ally in Paris – while the Commission’s position is weaker – as it will have to proceed against two member states at the same time. Italy’s Istituto Bruno Leoni together with Spain’s Instituto Juan De Mariana, the Czech Republic’s Liberalni Institut and the Lithuanian Free Market Institute promoted a manifesto, that was published as a letter to The Financial Times, signed by – among others – former European Commissioner Emma Bonino, former Italian Deputy Prime Minister Marco Follini, former French Minister of Finance Alain Madelin, and Italy’s current Minister of Defense Antonio Martino.

The manifesto calls for the removal of “barriers to the consolidation of European companies, by abstaining from hindering any acquisition of national companies by foreign enterprises; sell majority stakes of energy companies, where they are government-owned; and open all domestic markets to promote the development of a genuine European internal market.”

“Economic patriotism” – as the French elite calls it – leads to closed markets, with negative effects on consumers as well as energy security. It may be true that in some respects the EU is a French creation. But that is definitely not true where the best fruit of the union, namely economic integration, is concerned.