Foreign Influence
June 25, 2007
An investment fund from the Emirate of Dubai bought a 2.2 percent stake in Deutsche Bank and the German government has also received offers, so far unsuccessful, from Russian companies looking to buy shares of Deutsche Telekom.
"We are carefully watching how state-controlled corporate entities from Russia, China and the Middle East are taking a stake in or buying companies," Deputy Finance Minister Thomas Mirow told the Handelsblatt daily on Monday.
It often remains unclear what motivates the state-controlled funds which are increasingly looking to German companies, said Mirow, who added that more and more foreign financial institutes want to invest in Germany.
Protective measures coming?
High-ranking German officials are also considering if and how the country should implement measures to protect the country's core business from foreign takeovers, government spokesman Ulrich Wilhelm said Monday in Berlin.
"Considerations over whether we should come to a particular balance have been going on here for a series of months," he said.
Deutsche Bank CEO Josef Ackermann said last week that the government needed to decide if it wanted to defend domestic business from state-run foreign investment funds.
"I say we need to define strategic core areas and business sectors where we have the feeling that we need to have control as a country," he said. "In any case, we definitely should be doing it."
Precursor of protectionism?
Economics Minister Michael Glos has also said that his department was looking at how other European nations protected their domestic industries, though he added that he did not want Germany to be a forerunner when it came to protectionism.
State-owned investment funds are estimated to have a combined wealth of $2.5 trillion, according to Morgan Stanley.
Russia is reported currently to have foreign currency reserves of over $400 billion while China's are estimated to be $1.2 trillion. Both countries are putting a large portion of the money in state-run funds that then buy shares in western companies.
German Finance Minister Peer Steinbrück has said if China were to spend just part of its reserves it would be able to swallow several "big, fat, lovely" German companies. He also added that the German cabinet was likely to address possible protective market measures this August.
But not everyone in Germany is happy to see the European Union's largest economy considering protective market measures.
"This is a precursor of a new protectionism debate, and I'd warn against that," Bert Rürup, who heads Germany's panel of "five economic wise men," said Friday in an interview with the Reuters news agency.