Nicolas Sarkozy, the no-nonsense French interior minister and likely 2007 presidential candidate, has told Le Monde newspaper that the Gaz de France-Suez utility merger is looking increasingly compromised.

<p>Le Monde reports that the French government is now equivocating on the deal as the challenges facing the merger begin to pile up. In particular, concerns center on the concerted and sustained opposition from France&#0039;s trade union movement about the required privatization of Gaz de France. <br /><br />In 2004 the French government passed a law stating that its share in GdF could not fall below 70%, but for the merger to proceed, this law would need to be repealed to enable the government to reduce its share to 33%. Le Monde reported on June 6 comments from Mr Sarkozy made the week before, saying the change in the law had little chance of going ahead because it needed to be passed before the summer, yet the president and prime minister are &#0039;scared to move on any issue&#0039;.<br /><br />The scale of the backlash against the deal from unions has seemingly spooked many French national assembly members (MPs), already reeling from a string of political crises that have beset the country in recent times. It is thought that many are unwilling to confront the unions over GdF so soon after the humiliating government climbdown on labor reforms.<br /><br />All of which is good news for Italian utility Enel, which unwittingly sparked the controversial merger when it was linked to a possible bid for Suez. Enel has recently written to the European Commission outlining its fears about damage to competition in the market if the tie-up proceeds.<br /><br />Should the all-French alliance fall through, Enel may consider another approach for all or part of Suez. Enel is thought to be especially interested in Suez&#0039;s sizeable Belgian assets.</p>