Europe’s energy angst

THE EUROPEAN UNION’S ideal of a single market encompassing many nations was implemented in 1992, and for the most part, it has worked. Many goods and services, not to mention workers, now flow across national boundaries almost as seamlessly as they do across U.S. state borders.

Today, Brussels-based European Union officials still make lofty pronouncements about “ever-closer” integration. But last week’s tiff over energy mergers proves that, even in a land of true believers, globalization can be a long, hard slog.

The troubles began when Enel, Italy’s former energy monopoly, hinted that it might seek to buy French-owned Suez. Within days, Suez announced it would instead merge with Gaz de France, which is 80% owned by the French government. (Most people figured the move was intended to stave off the Italian bid.) French Prime Minister Dominique de Villepin said France was engaging in “economic patriotism.”

Italy snapped back, rightly calling it “neoprotectionism.” Officials in Rome threatened to draft a law to make it harder for foreign outfits to buy Italian companies. If you can’t beat ‘em, join ‘em.

It is hardly surprising that Europe’s energy sector is becoming a protectionist hotbed. EU antitrust regulations require nations to open their retail and wholesale energy markets in 2007, so there’s plenty of jockeying for position, with companies scrambling to snatch away chunks of what’s sure to be a consolidating industry.

What’s more, European politicians, like those in the United States, are only too happy to pander to constituent fears over energy security (remember what happened when Russia cut off gas supplies to the Ukraine?) and job loss (in France, opponents of further integration raised fears of “Polish plumbers” taking work from natives). Sluggish growth and high unemployment in countries such as France, Germany and Italy have left citizens wary of liberalizing trade with lower-wage markets in eastern Europe.

EU advocates worry that France’s actions will inspire copycats. In addition to stepping in on the energy deal, France also has recently written laws that allow it to block mergers in 11 “strategic” industries, including the production of yogurt. Spain has threatened to use a special veto to block a takeover of its national electricity company Endesa by German giant E.ON. Other governments are putting the kibosh on deals in the banking and steel sectors.

The energy squabbles are symptomatic of a general slowdown in European economic integration, but let’s hope they don’t portend the death of the open-borders ideal. If Europeans, who have worked so hard in the last 50 years to make world wars a thing of the past, can’t keep the dream of globalization alive, how will the rest of us?