View from Brussels: European Champions League fever

The final round of quarter finals in Europe’s premier club football tournament kicks off Friday evening (14 August) but UEFA’s competition is not the only champions game in town. Big plans are afoot on the continent to create global players, especially in transport.

In 2019, trainmakers Siemens and Alstom were on the cusp of pooling their resources and forming what would have been the second largest train-builder in the world, behind China’s state-run giant, CRRC.

The Franco-German tie-up’s advocates insisted that the creation of a “European champion” was necessary in order to protect the EU’s market from global competitors like CRRC, which is allegedly licking its lips at the prospect of eating Europe’s lunch.

But the EU's antitrust regulator nixed the deal, insisting that Alstom-Siemens would have been too powerful, too big to fail and reduce competition too much in the burgeoning high-speed-rail market.

That angered Berlin and Paris, whose governments criticised the regulator for not thinking globally enough and urged a rethink of how state aid and antitrust rules are implemented.

‘European champions’ are considered an effective and visible example of cross-border cooperation by politicians that want to build Europe’s global clout and soft power. The model set by Airbus is a constant yardstick for many in the ‘more Europe’ crowd.

In July of this year, Alstom got its merger wish, albeit with Canada’s Bombardier instead. A lot of EU-heads are touting it as proof of a rethink on the part of the European Commission in how it handles large-scale tie-ups.

Margrethe Vestager, the official in charge of competition cases, said that the merger “is conditional upon full compliance with the commitments”, which includes selling some factories.

Alstom-Bombardier will be the second largest trainbuilder once the deal is approved in other regions of the world but smaller than the newco with Siemens would have been. It will also struggle to be hailed as a ‘European champion’ given Bombardier’s Canadian ownership.

That will also be true to an extent of Fiat-Chrysler and Peugeot’s planned fusion, under the god-awful name of ‘Stellantis’, which is also under EU scrutiny at the moment.

The Italo-American group and French firm want to leverage each other’s strong points: access to the US market and know-how in electric vehicle production, in order to thrive in an increasingly tough sector.

Vestager’s services are concerned that the new company would unfairly dominate the commercial van market but auto-executives are willing to make concessions and secure blessing for the deal in time for an early-2021 launch.

‘Stellantis’ would be a feather in the cap for ‘European champions’ fans, if it would go on to make good on its potential, as most of the continent’s big hitters are German and do little to extol the virtues of cross-border cooperation.

The Commission is also taking its time probing what would be a truly European merger in the shipping sector, between cruise ship builders Chantiers de l'Atlantique, of France, and Italy’s Fincantieri.

“The transaction may significantly reduce competition in the market for cruise-ship building, which could lead to higher prices, less choice and reduced incentives to innovate,” the EU regulator said in an initial assessment last year.

An inquest is ongoing and a decision expected later this year.

Although the coronavirus outbreak has all but completely curbed cruising for the time being and its long-term impact on consumer habits is still unclear, the industry is still banking on growth and need for new ships, meaning that the merger is still a significant concern.

Fincantieri's operations are not limited to cruisers either, as it also builds merchant, military and specialised offshore vessels, all of which are likely to experience increased demand. Chantiers de l'Atlantique would boost capacity substantially.

The EU and its most powerful member states have desperately tried to recreate the Airbus magic over the last couple of decades, in areas as diverse as telecommunications and battery production, to little success.

Given how the world is changing and its drift towards less multilateral decision-making and more isolationism, it is likely that we will see more European champions getting the nod. 

Whether they will then go on to dominate like Barcelona and Real Madrid or fall at the final hurdle like Juventus and Atletico Madrid is anyone’s guess.

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