EU turns up heat over French energy merger

The European Commission gave France a two-week ultimatum on Friday to explain events that may have broken EU law leading up to a state-engineered merger of Gaz de France and Suez to create a "national energy champion".
EU Internal Market Commissioner Charlie McCreevy wrote to Paris on Thursday saying the withdrawal of French utility Veolia from talks on a potential rival bid for Suez raised questions about respect for EU treaty rules on the free movement of capital, his spokesman Oliver Drewes said.
"Certain information that was provided to us gave indications and are giving indications that some of the (treaty) principles ... have been violated," Drewes told a briefing.
The letter marks a first step towards possible legal action against France as Brussels responds to accusations from Italy that the all-French merger was a protectionist move undermining the EU's internal market.
Italy accuses France of engineering a tie-up of Gaz de France and Suez to thwart a potential rival joint bid for Suez from Italian utility Enel and Veolia.
France has until March 17 to explain itself to Brussels.
The EU's internal market is under strain, with banking mergers in Italy and Poland facing obstacles, and Spain and France pushing for all-domestic utility mergers to fend off foreign bidders.
The EU executive, which wants to ease cross-border European consolidation to increase competition and bring down prices, also said it expected to start legal proceedings against Poland next week for interfering with a pan-European banking merger.
Commission President Jose Manuel Barroso warned EU states on Wednesday against trying to protect national markets against each other and said he would raise the subject at a summit of EU leaders on March 23-24.
The letter to France represents a hardening of the Brussels' stance after it initially said there appeared to have been no breach of EU internal market rules.
"We want to establish information about a certain sequence of events, which mainly relate to the fact that the merger between Veolia and Enel was disrupted," Drewes said.
Enel sent the Commission a memorandum this week giving its version of events leading up to the announcement of the planned merger between Gaz de France and Suez. Enel says it began preparing its plan last November with Veolia and that the French government was informed in January.