By Huw Jones
Europe should remain open to investment from state-backed funds, fears unfounded, ministers agree.
Europe should remain open to investment from state-backed sovereign wealth funds as fears about any political motives they may have are unfounded, EU finance ministers agreed on Tuesday.
Ministers gave the nod to a policy paper from the European Union's executive arm that said no legislation was needed to deal with a sector armed with $2.5 trillion from commodity and energy revenues of countries such as Russia, China and Norway.
"Sovereign wealth funds have played, still play and will play an important role," Andrej Bajuk, finance minister for EU president Slovenia, told a news conference.
Ministers endorsed a global initiative to put together a voluntary code of conduct for SWFs by later this year.
There was a need to ensure the EU's rules on free movement of capital were upheld as SWFs played a significant role in the development of Europe and in providing liquidity during the current credit market upheavals, Bajuk said.
Some ministers expressed concerns that SWFs could take investment decisions based on political rather than commercial grounds but there was no evidence of this so far, he said.
"Maybe the fears are not well founded," Bajuk added.
Greek Finance Minister George Alogoskoufis said most ministers backed moves to adopt a common EU approach to dealing with sovereign wealth funds rather than states going it alone.
"There is a clear preference for a European approach in the form of a code of conduct, that was the majority view," Alogoskoufis told reporters.
The executive European Commission sees a code as fending off unilateral moves by EU states.
"We should uphold traditional European rules - investors are welcome but according to certain rules ... So now is the time to act before protectionist tendencies come to the fore in the sector," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.
France has expressed concerns about SWFs but fell in line.
"We support the position expressed by the Commission and we simply are mindful of the fact that the United States has available ways and means to take sanctions in case of non-compliance with the standards," French Economy Minister Christine Lagarde said.
The Commission has said that if the code failed, it may legislate.
Brussels' room for manoeuvre is relatively limited as the EU's top court has ruled that investments from third countries should benefit to some extent from the bloc's rules on the free movement of capital or establishment. (Reuters)