ITALY PLEASED WITH TAKEOVER AGREEMENT, INSISTS

UNCLAS ROME 005481 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: EFIN ECON IT EUN SUBJECT: ITALY PLEASED WITH TAKEOVER AGREEMENT, INSISTS U.S. FIRMS NOT PREJUDICED REF: A. ROME 4980 ¶B. FRANKFURT 7111 ¶1. (SBU) MARKING THE END OF A FIFTEEN-YEAR, OFTEN BITTER STRUGGLE AMONG EU MEMBER STATES TO AGREE ON A SINGLE TAKEOVER CODE, THE UNANIMOUS VOTE BY INDUSTRY MINISTERS ON NOVEMBER 27 IN FAVOR OF THE ITALIAN-SHEPHERDED PROPOSAL WAS A VICTORY FOR OPEN MARKETS, GOI OFFICIALS CLAIM. THEY ALSO INSIST THE TAKEOVER CODE WILL NOT DISCRIMINATE AGAINST NON- EU FIRMS IN TAKEOVER BIDS. ¶2. (U) FOLLOWING UP ON THE NOVEMBER 27TH APPROVAL BY THE COMPETITIVENESS COUNCIL OF THE CONTROVERSIAL TAKEOVER CODE, WE SPOKE WITH VITTORIO LA ROCCA, DIRECTOR GENERAL, INTERNAL MARKETS, MINISTRY FOR EU INTEGRATION, AND CARLO MONTICELLI, SENIOR DIRECTOR OF THE G7 AND EU AFFAIRS OFFICE, FINANCE MINISTRY. PRIOR TO THE NOVEMBER 27TH VOTE IN BRUSSELS, WE HAD SHARED WITH THESE OFFICIALS, AS WELL AS WITH THE INDUSTRY MINISTRY, U.S. CONCERNS ABOUT THE ISSUE OF RECIPROCITY. ¶3. (SBU) BOTH LA ROCCA AND MONTICELLI STATED THAT U.S. FIRMS WILL NOT BE ADVERSELY AFFECTED BY THE TAKEOVER DIRECTIVE. THEY INSISTED THAT THE RECITAL IN THE DIRECTIVE EXPLICITLY STATES THAT ALL EXISTING INTERNATIONAL TREATIES AND CONVENTIONS APPLY IN FULL FORCE AND WITH NO DEROGATION. ITALIAN OFFICIALS SPECIFICALLY PUSHED FOR SUCH PREAMBLE LANGUAGE TO ENSURE THAT MEMBER STATES AND THEIR COMPANIES DO NOT TRY TO USE THE CODE TO FEND OFF TAKEOVER BIDS FROM NON-EU FIRMS, PARTICULARLY THE UNITED STATES, LA ROCCA AND MONTICELLI REMARKED. ¶4. (U) ITALIAN OFFICIALS ARE PLEASED THAT ITALY SUCCESSFULLY CHAMPIONED ITS COMPROMISE PROPOSAL, AND CONSIDER THE APPROVAL OF A SINGLE TAKEOVER CODE ONE OF THE CROWNING ACHIEVEMENTS OF ITS EU PRESIDENCY. MONTICELLI EXPECTS THAT THE DIRECTIVE WILL SAIL THROUGH THE EUROPEAN PARLIAMENT SINCE NO ONE WANTS TO UNDO WHAT HAS TAKEN 15 YEARS TO ACHIEVE, HE WRYLY REMARKED. ¶5. (U) EU COMMISSIONER FRITS BOLKENSTEIN DOES NOT SHARE THE ITALIANS' SANGUINE OPINION ABOUT THE POSITIVE MARKET EFFECTS OF THE TAKEOVER DIRECTIVE. BOLKENSTEIN LAMBASTED THE TAKEOVER DIRECTIVE, AND ARGUED THAT IT WILL REVERSE STRIDES MADE TOWARD MAKING THE EU THE MOST COMPETITIVE ECONOMY IN THE WORLD. IN AN ASIDE, MONTICELLI ADMITTED THAT TIME WILL TELL WHETHER THE COMPROMISE AGREEMENT WILL LEAD TO A MORE COMPETITIVE EURO-ZONE ECONOMY. SEMBLER NNNN 2003ROME05481 - Classification: UNCLASSIFIED