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France issues law to block foreign takeovers of strategic firms

The French government has issued a decree allowing it to block any foreign takeovers of French companies in"strategic" industries, throwing up a potential roadblock to General Electric's planned $16.9 billion bid for Alstom's energy assets.

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The decree published in the official state gazette onThursday, and seen by Reuters, will give 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.

The government had not previously given any hint it was considering such a measure, although Economy and Industry Minister Arnaud Montebourg has openly criticized 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.

"With this decree, we're armed to continue discussions and negotiations with the two companies that have expressed an interest," a source close to Montebourg said.

GE declined to comment. No one at Alstom was immediately available for comment outside European business hours.

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," the source 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 foreign investments but to ensure strategic sectors are protected in the nation's interest.

The powers granted are similar to what already exists in other European countries and in the United States, where the president has powers to block certain deals, the source added.

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