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Passions rampant among thwarted Italians

Paris, 27 Feb. (AKI) - Italy's industry minister, Claudio Scajola on Monday cancelled a visit to the French capital, Paris, describing as "neo-protectionism" the newly announced 73 billion euro merger between two leading French energy companies, state-controlled Gaz de France and the power and water group, Suez. "If neo- protectionism prevails, the political and economic destiny of the European Union will be compromised," he said.

"Neo-protectionsm damages the rights of consumers and the chances for businesses to develop," he continued . The EU executive said on Monday the merger does not appear to breach EU rules on the free movement of capital.

The merger comes only days after Italian energy giant, Enel, announced it was mooting a hostile takeover bid for Suez and its Belgian energy subsidiary, Electrabel, the leading utilities company in Belgium, the Netherlands and Luxembourg. Scajola's calls were backed by politicians from across the political spectrum. Observers say the pressure on Enel to seek industrial alliances or acquisitions outside Italy is unlikely to relent: the 34 percent state-owned company is cash-rich and legally banned from strengthening its domination of the domestic energy market.

Refers to The Great War 

On Sunday, Italy's economy minister, Giulio Tremonti, accused France of protectionism. "The tendency of European states to build protective barriers must be stopped. We still have time. If not, we risk an August 1914 effect," he warned, referring to the start of World War I. Also on Sunday, the Belgian government gave its backing to the proposed deal.

French unions have accused the French government of a "dagger strike" in what would amount to the full privatisation of currently state-controlled Gaz de France. This week, France's prime minister, Dominique de Villepin, will call on parliament to agree a rapid change to the law, which requires the French state to hold at least 70 percent of its power utilities. It currently hold 80 percent of Gaz de France. However, finance minister, Thierry Breton, is expected to pledge the government will not go below a 34 percent stake in a meeting with France's biggest five unions on Monday.

The merger of Gaz de France and Suez will create Europe's second largest energy group. Observers are describing it as the first opportunity de Villepin has had to put into practice "economic patriotism", a phrase he first used last year when fighting a hostile takeover of the leading French food group Danone by US soflt drinks giant Pepsico.

De Villepin's move to fend off a hostile foreign bid for Suez came after the government met with fierce criticism for failing to halt the world's largest steel company, Indian-owned Mittal Steel's 18.6 billion euro hostile takeover bid for Arcelor, the world's second largest steel company. Acelor, which employs 98,000 people worldwide, was created in a merger four years ago between three steel companies: Spain's Aceralia, France's Usinor and Luxembourg's Arbed.

European energy giants are still partly controlled by national governments. Last week, it emerged that EU founder nations France, Germany, Belgium and the Netherlands began talks to set up a single electricity market and prise open national electricity businesses in a first step towards a new common EU energy policy.

The European Commission - the EU executive - is due to unveil a major blueprint (green paper) on energy policy in March, but leaks of the draft document suggest Brussels will be held in check by a lack of solidarity among member states.ENERGY ITALIAN FURY AT FRENCH MERGER