Germany intends to pass laws for the creation of a government-owned fund that would protect vital German companies from being acquired by foreign companies (especially Chinese ones), by end of 2019, according to Reuters. This is a major departure from the government’s “laid-back” approach towards business.
Peter Altmaier, the Economy Minister first suggested the creation of such a fund in February this year as part of a more protective industrial strategy, and three government official confirmed to Reuters that the government was in the process of creating draft laws with the intention of having a fully operational fund by next year.
According to two senior government officials who requested to remain anonymous, the idea is that the government-owned fund will work with businesses to buy stakes in key companies that are facing unwelcome foreign takeovers.
One official suggested that the government could acquire an initial stake then quickly sell it to private investors, while the second official clarified that the fund could collaborate with private investors from the beginning.
The first official explained that:
In the past, Germany was too reluctant to define its national interests. This is changing now. We see that we cannot lean back anymore and let everything be decided by the free play of market forces, and this means more protection from the state.
The German government has always advocated for free markets, but this recent move is in response to the threat posed by China’s state-controlled companies and the unilateral tariffs and sanctions that are being dangled by U.S President Donald Trump, the sources confirmed.
German leaders have lived by the “ordoliberal” principles outlined by Ludwig Erhard, the first economy minister following World War II, who stated that free markets should solely decide the winners and losers in business and that the government should only provide the infrastructure to facilitate fair competition