The move prompted an angry response from the Italian government, which compared France's stance to the nationalism seen in the run-up to the First World War. There is also opposition to the merger from trade unions.
The boards of Suez, which owns gas, hydro and nuclear facilities across Europe, and Gaz de France (GdF), the state-controlled energy company, met separately last night and both approved the ¤72bn (£49bn) deal. The terms of the merger are likely to be unveiled today.
France's finance and industry ministers and the heads of the two companies will meet trade unions this week. Thierry Breton, the Finance Minister, will kick off the talks today and they are expected to continue until Wednesday.
Shares in Suez had surged 14 per cent since Enel of Italy said last week that it was interested in its Belgian unit and would not rule out making a bid for the whole company.
But on Saturday Dominique de Villepin, the French Prime Minister, appeared on television to hail the merger as fulfilling the Government's ambition to create one of the largest energy groups. "Taking into account the strategic importance of energy, the merger of GdF and Suez seems the most appropriate track," he said.
Giulio Tremonti, the Italian Economy Minister, said Europe risked returning to a vicious cycle of nationalism like that seen before the First World War.
"Then, no one wanted war, but war happened," he told an Italian newspaper. "Today, no one wants the blocking of the European market, but then someone launches an ultimatum and the other one responds and the effect is a waterfall."
Claudio Scajola, Italy's Industry Minister, cancelled a meeting with François Loos, his French counterpart, which had been due to take place today. "Neo-protectionism damages the rights of consumers and the possibility of business development," he said.
The French move could throw into doubt the smooth passage of the ¤9bn bid by the French bank BNP Paribas for Italy's Banca Nazionale del Lavoro.
The deal will be a fresh challenge to Charlie McCreevy, the EU commissioner in charge of the internal market, who intervened last week to force Spain to amend laws that would have enabled it to block a German takeover of Endesa, the energy company.
Gaz de France is 80 per cent controlled by the French state, but any deal with Suez would dilute its holding to 30 per cent. This would be below the 70 per cent holding the law requires for state companies and would represent privatisation by the back door. France would have to pass new laws to allow the deal to go through.
Fulvio Conti, the chief executive of Enel, said the move was a pre-emptive manoeuvre to shield the country's utilities from foreign takeovers. " It's as if the Italian government forced Eni to take over Fiat to defend it from a takeover bid by Renault," he said. French sources countered that until the forced resignation of the central bank governor Antonio Fazio, it had been impossible for outsiders to buy into Italian banks.
Sources at Suez said a merger with GdF had been under discussion for some time. "It was not dreamt up on Thursday afternoon," one said. He said a merger would enable Suez, which owns the Belgian end of the Bacton-Zeebrugge gas pipeline into the UK, to create a real European competitor. The company was understood to be concerned that a takeover by Enel would saddle the combined group with ageing Italian facilities which needed investment.Reuse content