It is time that the European Union stopped trying to defend a piece of institutional fiction: capital does not move freely in the EU, as protectionist barriers in France, Germany or Italy attest. Because companies cannot invest freely in each other’s economies we do not have a common energy market. This is something Europe needs now more than ever before.
To have a common European energy market and pan-European energy companies, we also need pan-European rules that govern cross-border acquisitions. We are still far from this goal.
Not all the countries are playing with the same cards. In the absence of common rules, free-marketeers are vulnerable to the predatory actions of protectionists. The UK has an open-minded attitude towards the liberalisation of its markets; its policies have been consistent with a liberalised regime. France and Germany, however, do not practise what they preach. When Enel of Italy expressed an interest in Suez, Patrick Devedjian, secretary-general of France’s ruling party, the UMP, said: “Our country cannot afford to leave such patrimony in the hands of competitors that would sustain their interests.” Will Mr Devedjian hold the same opinion if EDF, the state-owned French utility, pursues its interest in acquiring Iberdrola, a private Spanish group?
Like the UK, Spain has liberalised its energy markets. But its commitment to liberalisation is not set in stone. It might reverse the policies of the past decade if it decided it did not want foreign state-owned groups controlling most of its energy companies. Already, Italy’s Enel , Suez of France and Eon of Germany either have big stakes in Spanish utilities or are interested in acquiring assets in Spain, without offering any reciprocity in their domestic market. EDF, 80 per cent owned by the French government, is interested in acquiring Iberdrola, Spain’s largest energy group, for an asset-stripping exercise. Iberdrola owns Scottish Power in the UK and is buying East Energy in the US. Europe’s state-owned energy behemoths are again hovering over Spain’s liberalised energy sector.
This has implications for Spain’s productive economy and technological innovation. Iberdrola, for example, is the world’s biggest producer of wind energy. It is also the main shareholder in Gamesa, the biggest manufacturer of wind turbines after Denmark’s Vestas. If Iberdrola were taken over by EDF, would the French group be as interested in maintaining Spain’s leadership in innovation for renewable energies? How would EDF value Spain’s geostrategic relations with Latin America and the investments of Spanish energy groups in that region?
Because of its energy reserves, Latin America is an area of strategic interest for Europe. Latin America helps Europe diversify its sources of supply and energy investments help consolidate an alliance with a region that is rapidly tilting towards Asia. For Spain, no one can deny the strong cultural and historical ties it has with the region. But political ties are not enough. Economic and technological prowess are increasingly important in cementing relations. The energy sector, especially renewable energy, may give Spain the chance to be a big influence, with its energy companies helping to modernise those in Latin America.
For these reasons, the future of the energy sector is a strategic matter for Spain. The loss of its energy companies to foreign buyers would weaken its relations with Latin America – one of Spain’s big competitive advantages in Europe. Ultimately, the loser would be Europe itself. Without Spain, the only two powers vying for influence in the region would be the US and China; Europe would be sidelined. With the US and China, plus Russia, vying for the world’s energy resources, Europe’s inherent weakness is evident, and compounded by EU inability to speak with a single voice in relations with Russia.
The benefits of a common energy market are not in dispute. It would enhance competitiveness in Europe. The interconnection of networks would allow energy to flow freely across borders, improve energy security and benefit consumers. A common energy market would strengthen Europe’s negotiating clout with suppliers and provide a strategy for energy autonomy.
Unfortunately, there is no consensus on how to achieve this. State-controlled energy groups, of course, have a lot to lose if their market is opened to real competition. Europe has a choice between a liberalised common market and a protectionist one. This is the real debate. It can no longer be postponed.
