The French government has issued a decree allowing it to block foreign takeovers of French firms in “strategic” sectors, throwing up a potential roadblock to General Electric’s $16.9 billion bid for Alstom’s energy assets.

The decree, extending an existing 2005 law relating to the defence and other industries, was published in the official state gazette yesterday and gives the state much-increased powers to block foreign takeovers in the energy, water, transport, telecoms and health sectors.

Any such acquisition will now need the approval of the Economy Minister, the decree published in France’s Official Journal said.

“With this reform, France will have a clear and efficient legal framework comparable to that in a number of other open economies within and outside Europe,” Economy Minister Arnaud Montebourg, who has repeatedly insisted any outcome for Alstom must be in France’s national interests, said in a statement.

“This new measure will of course be applied in a selective and proportionate manner, taking into account the merits of each situation,” he said, adding that the decree would take effect within 24 hours of publication.

The move comes 10 days ahead of European Parliament elections in which President Francois Hollande’s Socialist party is expected to do badly due to its failure to tackle unemployment, and where the National Front – campaigning on a protectionist, anti-EU platform – is set to score big gains.

It also comes amid mounting concerns in other countries against foreign takeovers, with lawmakers in both Britain and Sweden expressing opposition to US drugmaker Pfizer’s attempts to buy rival AstraZeneca.

The French government had not previously given any hint it was considering such a measure, although Montebourg has openly criticised the Alstom-GE proposal and instead advocated a European tie-up with Germany’s Siemens.

The French engineering group has given itself until the end of the month to review its options. GE declined to comment and no one at Alstom was immediately available for comment.

Cash-strapped Alstom, which builds France’s high-speed trains, was bailed out by the French government a decade ago and is seen by many in France as an embodiment of the country’s engineering prowess.

“This decree will smooth the way for talks with GE and Siemens and allow our demands to get more of a hearing,” a source close to Montebourg said. The veto will not necessarily be used, the source added, but is aimed at giving France a seat at the table.

The source said France did not seek to block all foreign investments but to ensure strategic sectors are protected in the nation’s interest. (Reuters)

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