EU quizzes French over Suez bid block

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The European Commission stepped into the bitter row over economic nationalism and energy mergers yesterday, giving the French government two weeks to repudiate claims that it prevented an Italian bid for Suez.

In what could be a prelude to legal action against Paris, the EU internal market Commissioner, Charlie McCreevy, wrote to the French government asking for its account of how Veolia withdrew from talks on a joint bid with Italy's Enel for Suez.

Two days later, the French government announced the merger of Suez with Gaz de France in a €73bn (£50bn) megadeal which has sparked fears of a new wave of economic nationalism sweeping the EU. Italian politicians have reacted with fury to France's bid to create a "national champion", and Mr McCreevy's initiative followed the submission of a paper by Enel detailing the run-up to the merger announcement. It said that, on 22 February, Veolia's chief executive, Henri Proglio, told his counterpart at Enel, Fulvio Conti, that he had been "invited" to drop the negotiations with the Italian utility giant.

Earlier this week, the European Commission said it had no evidence that EU law had been broken. But, after receiving the Enel document and hearing representations from Italy's economy minister, Giulio Tremonti, that seems to have changed. Mr McCreevy had "indications that some of the principles" of the single market "have been violated", a Commission spokesman said.

Article 56 of the EU's governing treaty bans all restrictions on the movement of capital between member states. A market abuse rule that took effect in 2004 requires companies to disclose publicly information that could have an impact on the market.