Merkel joins Volkswagen workers in EU court clash

VALENTINA POP

24.09.2008 @ 09:28 CET

German Chancellor Angela Merkel backed on Tuesday (23 September) the so-called Volkswagen Law, despite criticism from the European Commission and a ruling of the European Court of Justice last year to scrap the legislation protecting domestic control of the company.

"The VW law will stay,'' Mrs Merkel said to a cheering crowd of about 15,000 staff and management at Volkswagen's headquarters in Wolfsburg, Bloomberg reports. "We will maintain this position in talks with the EU Commission with all rigor and clarity.''

• Print
• Comment article

Last year, the European Court of Justice (EJC) ruled that the 48-year-old law aiming to protect the German car manufacturer from hostile takeovers was "in breach of the free movement of capital" in the EU.

The law stipulated that no single shareholder can hold more than 20 percent of the voting rights in the company and that Germany and the region of Lower Saxony are each entitled to appoint two members to the firm's supervisory board.

However, in response to the ECJ ruling, Germany has drawn up draft legislation that nevertheless maintains Lower Saxony's blocking minority of 20 per cent.

"We have implemented the EU's ruling on the VW Law," Mrs Merkel said, arguing: "We think we can keep the 20 percent blocking minority."

Ms Merkel made the comments despite the EU's internal market commissioner, Charlie McCreevy, having already threatened another lawsuit at the European Court of Justice if Germany keeps the law.

"The German authorities have disregarded a court ruling and the European Court of Justice now has to define the consequences,'' Oliver Drewes, Mr McCreevy's spokesman, said on 9 September in Brussels.

Lower Saxony state premier Christian Wulff, an influential figure in Ms Merkel's conservative Christian Democrat party, has pushed for the federal government to protect his state's role in the company, which employs nearly 150,000 people in Germany.

Speaking in Wolfsburg, Mr Wulff said Volkswagen had become "Germany's most valuable company," partly as a result of participation by his state, and said that demands from Brussels were placing a burden on the company. "The world is not governed by money alone, people need security", Mr Wulff said, FAZ reports.

Ms Merkel, who faces a national election in September 2009, argued that the current turmoil in the financial markets calls for stricter regulation in order to protect workers, claiming that the Volkswagen law works exactly in that direction.

"We're counting on you,'' Bernd Osterloh, the head of Volkswagon's works council, told Ms Merkel. "We don't want the European Union to sacrifice the rights of workers.''

The draft proposal backed by Mrs Merkel keeps the provision requiring two thirds of the supervisory board to pass decisions such as job cuts and plant closures, with workers holding half the seats on the supervisory board. While the blocking minority at other German companies is 25 percent, Lower Saxony has only 20 percent of the votes at Volkswagon.

Set against the Volkswagon law is also Stuttgart-based car maker Porsche, which raised its stake in Volkswagen to 35 percent on 16 September and has said it plans to take the stake to over 50 percent by November.

The luxury sports-car maker says Lower Saxony's veto power is no longer valid after the EU court's ruling.