Brussels has raised no objections to the Spanish veto of a Hungarian bid that would have acquired the totality of Talgo, a domestic train maker.
The decision of the Spanish government to veto the Hungarian takeover of Talgo, a domestic manufacturer of high-speed trains, has received the implicit endorsement of the European Commission, which traded carefully as the news, charged with a geopolitical dimension, continues to make headlines.
“The prerogative of such decisions lies with member states,” a Commission spokesperson said on Thursday afternoon, asked about the failed transaction.
“In line with EU treaties, member states can restrict single market freedoms, such as the freedom of establishment and the freedom of movement of capital on public security grounds,” the spokesperson added. “These measures must be justified and proportionate to the objective pursued.”
The Commission noted any dispute between the parties would be ultimately resolved in Luxembourg, by the European Court of Justice, rather than the executive in Brussels.
The comments come several days after Madrid announced it would block the 100% acquisition of Talgo by Ganz MagVag Europe, a Hungarian consortium. The failed transaction was worth €619 million.
The Spanish government said on Tuesday the bid would have entailed “insurmountable risks for national security and public order,” without providing further details. The press release described Talgo as a “strategic company in a key sector for the economic security, territorial cohesion and industrial development of Spain.”
El País, a leading newspaper, later reported that the Spanish intelligence services had produced a report raising the alarm about the consortium’s links with the government of Hungarian Prime Minister Viktor Orbán and with Transmashholding, Russia’s largest manufacturer of trains and rail equipment.
The report noted that 45% of the consortium belongs to Corvinus International Investment, a state-owned investment fund, while the remaining 55% stems from Magyar Vagon, a firm that maintains “informal connections” with Transmashholding.
Andras Tambor, a senior executive in the consortium, is said to have a close relationship with Orbán, something not uncommon in Hungary, where the hard-right government has significantly expanded its influence over the private sector.
The possibility of Russia getting hold of Talgo’s proprietary technology that allows locomotives to change track gauges has also come into focus.
Geopolitical dimension
In response to the veto, Ganz MagVag said it would take legal action and bring the subject to Brussels, thrusting the bilateral spat into the European stage.
But the European Commission said it had not been contacted by any of the parties, neither before nor after the veto was announced.
“The Commission does not need to approve ex-ante Spain’s decision to veto this acquisition,” the spokesperson said.
Madrid’s move is nevertheless exceptional: business transactions between EU member states are an everyday phenomenon and hardly ever the source of any controversy thanks to the trust that governments have in each other.
In recent years, the bloc has armed itself with new legal tools to ramp up control of foreign investments, but this only applies to non-EU companies, particularly from China, which have mounted takeovers of domestic firms in critical fields.
ADVERTISEMENTThe veto raises fears of diminishing confidence in the single market as a result of Hungary’s insistence on developing links with Russia in open defiance of Western sanctions. Orbán’s self-styled “peace mission,” which in early July took him to Moscow to meet with Vladimir Putin, triggered a furious outcry and a boycott of Hungary’s six-month presidency of the Council of the EU, set to last until 31 December.
The news coincides with a growing dispute over Budapest’s decision to relax visa requirements for Russian and Belarusian guest workers. Brussels warns the changes could allow “potential Russian spies and saboteurs easy EU access”, jeopardising the security of the passport-free Schengen Area.
