Oct. 21 (Bloomberg) -- French President Nicolas Sarkozy called on European governments to set up sovereign wealth funds to buy stakes in European companies at beaten-down prices and prevent takeovers by overseas predators.

Purchases by nationally run investment funds in the wake of the stock-market rout could also spin a profit for governments once share prices recover, Sarkozy told the European Parliament in Strasbourg, France today. Germany called the plan unnecessary.

``I wouldn't want to see European citizens wake up in a few months and discover that a European company is owned by non- European investors who bought at a rock-bottom price,'' Sarkozy, current holder of the 27-nation European Union's presidency, said. ``The opportunity might be there to create our own sovereign wealth funds.''

Sarkozy said the U.S.-triggered financial shakeout has mired Europe in an economic crisis, forcing governments to take steps to shore up companies like last week's EU vow to consider offering loans to the car industry.

Germany, Europe's largest economy, earlier this year approved a law aimed at fending off undesired foreign takeovers and believes that additional protections in Germany are ``not necessary,'' government spokesman Ulrich Wilhelm said in an e- mailed statement. Any further measures to fend off foreign companies would also need to conform to internal market rules, he said, adding that German companies are in ``robust condition.''

Slashed Forecast

Germany last week slashed its forecast for growth in 2009 to 0.2 percent from a prediction of 1.2 percent made in April, warning that export markets are drying up.

Sarkozy's endorsement of sovereign wealth funds comes after he last week compared them to hedge funds, the lightly regulated investment vehicles that he partly blamed for the market meltdown.

Europe's Dow Jones Stoxx 600 Index has lost almost half its value since peaking in June 2007, culminating in a 21 percent dive from Oct. 6-10 as the escalating credit crisis forced European governments to prop up the banking system.

The resulting pledges of at least 1.8 trillion euros ($2.4 trillion) in capital and loan guarantees for banks further drain European budgets, leaving little to invest in other companies, said Joerg Kraemer, chief economist at Frankfurt-based Commerzbank AG.

``We simply don't have the money,'' Kraemer said. Sarkozy's proposal also ``suggests that all foreign sovereign wealth funds are negative. That's an assumption I don't share.''

Code of Conduct

The European Commission, the EU's executive arm, has declined to propose legislation restricting non-European sovereign funds, calling for a code of conduct instead. Commission spokesman Oliver Drewes had no comment on Sarkozy's ideas today.

At a summit last week, EU governments agreed to look at stepped-up lending to carmakers to offset $25 billion in low- interest loans that U.S. rivals including General Motors Corp. and Ford Motor Co. are set to get to help build environmentally friendly cars.

Championed by Germany, Italy and France, the vow gave an inkling of the economy-boosting steps being weighed by European governments to avert a recession.

European support for businesses could embrace other ``key'' industries such as construction, as long as the aid promotes energy-efficient housing stock, European Commission President Jose Barroso said today.

No Details

Barroso gave no details and sought to prevent any state backing from undermining the pro-competition rules and restrictions on subsidies that form the core of the bloc's border-free common market.

``We are facing a serious economic slowdown,'' Barroso told the parliament. ``There is no magic bullet to turn around the European Union economy.''

Sarkozy also stressed France's desire of pairing the European Central Bank, in charge of interest rates in the 15- nation euro region, with an ``economic government'' responsive to national leaders.

The French president, who came into office last year questioning ECB interest-rate policy and calling for a weaker euro, said the central bank would have nothing to fear from more ``coordination'' with governments.

Crisis Handling

Insisting that the ECB's independence isn't up for debate, Sarkozy praised the bank's president, France's Jean-Claude Trichet, for his handling of the crisis. As well as offering unlimited amounts of dollars and euros to banks, the ECB this month cut interest rates for the first time since 2003.

Sarkozy urged more meetings of government heads of countries using the euro, modeled on the precedent-setting emergency session he chaired in Paris last week. Until then, only finance ministers had gotten together at euro-15 level.

Sarkozy claimed credit for Europe in calming the financial storm and prodding President George W. Bush into holding a global summit to rework the international economic rules in force since the end of World War II.

Such a summit should go beyond strengthening banking supervision, he said. ``The monetary system has to be reshaped as well as the fixed rates and the rates indexed on currencies,'' Sarkozy said.

European leaders will get together before the global summit to coordinate their stance, Sarkozy said. The EU is pressing for the wider summit -- including Group of Eight countries plus at least China and India -- to take place in late November or early December in the U.S.

To contact the reporters on this story: Helene Fouquet in Strasbourg at hfouquet1@bloomberg.net; James G. Neuger in Brussels at jneuger@bloomberg.net

Last Updated: October 21, 2008 13:50 EDT