The hot screw that shakes European Union companies

The hot screw that shakes European Union companies

Naturgy lost 14.96% on the stock market yesterday, bringing the share price to 21.14 euros. The announcement that Abu Dhabi Energy Group was withdrawing its interest in entering the energy capital shook the value of the group, which was lower than the price paid by the Australian fund IFM in January 2021: €22.19. Two months ago it was trading above €28.

The potential entry of a public company from a principality into a strategic sector in Europe was another point and follow-up in the long list of companies or sovereign funds from non-democratic countries entering corporate capital in the European Union. “Foreign competitors in the public sector must be monitored much more carefully than competitors in the private sector because of the subsidies and subsidies they may receive,” says Jordi Goal, economist and professor at Iese Business School.

Should the European Union avoid his entry into the capital, let alone prevent him, since his counterpart is impossible? If they cannot be avoided, what alternative measures should the EU develop to compensate for these situations?

There are different solutions being offered. Italian economist Mariana Mazzucato calls for strengthening cooperation between the public and private sectors in the European Union. He answers: “Sometimes this can be done through an equity stake, and sometimes this can be done through conditions specified in prices or intellectual property rights of companies.” There are governments, such as the Spanish government, that have decided to advocate for greater direct participation, as happened with the purchase of 10% of Telefónica through Sepi.

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The road map drawn up by Enrico Letta, former Italian Prime Minister and President of the Jacques Delors Institute, on developing the EU as a market, stresses the necessity of creating a union of “public savings and investments.” The goal: “In the face of strong global competition, the EU must redouble its efforts to develop a competitive industrial strategy,” says Letta. In his case, Letta needs to delve deeper into the 2015 project to create a unified capital market, which fell far short of his aspirations. The reason, according to Letta: the lack of broad political interest on the part of countries. They wanted to continue to maintain their local markets.

Not having much money

A single capital market and the development of a unified savings and investment strategy would reinforce one of the EU’s major weaknesses: the lack of large international investment funds. As for existing funds, especially insurance companies such as Allianz or management funds such as the French Amundi, they are American. BlackRock tops the global rankings with assets amounting to $10 trillion. Letta believes that one option is to develop systems that would benefit the establishment of private pension funds in the European Union. The EU countries have 33 million euros in private savings, of which 34.1% are in the form of deposits. “This wealth is not being fully exploited to meet the EU’s strategic needs,” says Letta. “A worrying trend is the annual transfer of European resources to the US economy and US asset managers.”

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Unifying the capital market and encouraging private saving and investment would also finance the growth of European companies with greater momentum, whose weight in the global capital rankings is small. There are only 11 EU companies in the world’s 100 largest companies. The first is the Danish pharmaceutical company Novo Nordisk, which reached this position thanks to the launch of its anti-obesity drug.

And to create an EU sovereign fund like Norway, Arab countries and some Asian countries would have to invest financially – especially Scandinavian – and strategically – Arab – in values ​​from all over the planet? This option is still elusive and requires identifying the financial resources that will be used to feed this fund, which requires a high level of management and transparency. More questions: Can this European sovereign fund be financed through certain taxes?

The three groups that have characterized the EU’s recent period, the Conservatives, Social Democrats and Liberals, still have sufficient majorities to reshape the government and the ability to answer these questions.

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