President Chirac told a European summit meeting that the government would decide ‘within days’ when the legislation allowing the state to hold less then 70% of Gaz de France would go through parliament.

A change in French law is required to facilitate the merger since the government will hold only a minority stake in the merged company. It was thought that the legislation would be passed by the early summer, however this seems increasingly unlikely as opposition to the agreement mounts from all sides.

French interior minister Nicolas Sarkozy recently exposed the deep divisions within government as Le Monde quoted him remarking that President Chirac and his prime minister Dominique de Villepin were ‘paralyzed’ over the issue, while many French MPs are worried that the merger – personally spearheaded by Mr de Villepin – would cause another crisis with the labor unions, coming only a few weeks after a major stand-off over employment reform.

To make matters worse, on June 18 Suez CEO Gerard Mestrallet told French newspaper le Journal de Dimanche that his company could walk away from the merger if the go-ahead for effectively privatizing GdF is not received by the summer.

If the project is not launched irreversibly by this summer, I will be forced to go back to my board of directors without delay to recommend that we seek other options in order to protect the 160,000 employees in the group, while maintaining my capacity to take initiatives, he told the paper.

Meanwhile, the EU’s competition commissioner Neelie Kroes has also added further fuel to the fire by announcing that the European Commission’s investigation into the antitrust element of the deal would be more extensive than first envisaged. Bloomberg quoted her as saying that the tie-up is so complex, it is ‘like an octopus’. The EC is thought likely to focus in on the Belgian market, where both GdF and Suez have significant assets.