1 The Collapse of the European Union Directive on Corporate Takeovers: The EU, National Politics, and the Limits of Integration Berkeley Roundtable on the International Economy Discussion Paper John W. Cioffi * September 28, 2001 I. Introduction The twelve-year process of debating, amending, and garnering support for and opposition against the 13 th Directive on Takeover Bids is now over. An unusual coalition of Christian Democrats and Social Democrats killed the Directive in the European Parliament. The defeat of this effort was effected by a broad political backlash led by managerial and labor interests against the adoption of Anglo-American “shareholder capitalism,” a mode of economic organization that favors shareholder interests in the governance of firms and the economy as a whole. The rejection of the Directive may represent the end of an agenda for the harmonizing of company law and the uniform regulation a common market for corporate control in the European Union. It certainly delays the completion of the much-vaunted Financial Services Action Plan for a single unified market in financial services in Europe by 2005 and may require a substantial reconsideration of what this unified market will look like in the end. For a number of reasons, considered below, the Takeover Directive may constitute the high water mark of an attempt to import neo-liberal governance structures into Continental Europe. The extraordinary interplay of domestic and EU politics and the fractiousness of EU political actors and institutions triggered by the Takeover Directive prompts a wide range of questions central to the future of political and economic development in Europe. These issues can be examined at three broad levels of analysis. The first level of analysis focuses on the intense political struggle over the Takeover Directive provides a window into the domestic politics of economic and legal reform at the level of the member states. To answer why this Directive failed when initiatives in so many other areas, ranging from financial services to data privacy, have not generated such broad opposition requires an analysis of the domestic interest group politics in the member states. Second, the collapse of the Takeover Directive indicates changes in the allocation of policymaking power and regulatory capacity in Europe. What does the failure of such an important EU initiative indicate about agenda setting and policy making in the EU, particularly with respect to the balance of power between the Commission, the European Parliament, and the member states? The third level of analysis concerns the practical repercussions and implications of the failure of the Directive and compels consideration of a advanced continental economy without a basic mechanism of corporate and sectoral restructuring and a mode of corporate governance and capital reallocation that has come to * Assistant Professor, University of California, Riverside, Department of Political Science and Research Associate, Berkeley Roundtable on the International Economy.