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Brussels set to block rail merger between Alstom and Siemens

Brussels is set to block the rail merger between Siemens and Alstom in a landmark competition decision for Europe that the Siemens chief executive warned would reflect the "absolutely naive" mindset of the EU.

Margrethe Vestager, the EU competition commissioner, is pressing ahead with an internal recommendation to veto the tie-up, after last-ditch concessions from the German and French train manufacturers failed to address their concerns, according to several people with direct knowledge of the decision .

Although a political debate is possible when the college of 28 commissioners formally vote on the matter – most likely in a meeting the next week – only one or two commissioners are expected to object to the recommendation of Ms Vestager, senior officials of the EU involved in the deliberations said.

The decision deals a blow to a push by France and Germany to create "European champions" capable of competing with state-backed foreign rivals. It will probably reignite the debate over the EU's antitrust regime.

The planned merger was one of the most important test cases for the commission since it assumed powers to vet EU mergers in 1989. The companies gathered support from their respective governments to create a group they argued it was necessary to avoid the growing competition from the CRRC of China, the world's biggest trainmaker.

Bruno Le Maire, France's finance minister, said this weekend that "nothing can justify" Brussels stopping the merger, while on Wednesday Peter Altmaier, Germany's economy minister, said Berlin "wants this merger to happen."

"The international market in this industry is fiercely competitive … we need big players, we need a European champion for that, which can cope with competition from companies in the US and China. That's why I think this merger makes sense and is the right thing to do, "Mr Altmaier said.

Joe Kaeser, chief executive of Siemens, acknowledged that the prospects of the deal being approved were slim in a press conference on Wednesday, calling Brussels' competition regime "backward."

Ms Vestager told colleagues that Siemens and Alstom were given the option of asset sales in their signaling and high-speed train businesses to secure their approval, but that these suggestions were turned down. Instead the companies opted to add marginal changes to their initial offer to address the commission's concerns, EU officials said. At such a late stage in the process, "the European Commission has no legal option" but to block the deal, one said.

Two senior advocates of the merger said they suspected that the decision by Siemens and Alstom to withhold such concessions might have reflected second thoughts on the deal within the companies. But Mr Kaeser on Wednesday continued outspoken efforts to convince the commission to ditch what he described as obsolete rules that failed to adjust how the world had changed over three decades.

In a response to a previous post on social media by Ms Vestager, that "those who love Europe must shape it," Mr. Kaeser lashed out at the blog's competition rules drafted in the 1990s.

"It's absolutely naive to believe that individual European states can actually stand by themselves against competition from China, America, even India at some point – that's impossible," he said. "If we really want to be global players, we need a common European foreign economic policy. That is crucial. "

Additional reporting by Guy Chazan in Berlin

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