FRANKFURT, March 14 (Reuters) - The European Commission is raising pressure on Germany to do away with a controversial law that protects German automaker Volkswagen AG from a hostile takeover, a German magazine said on Sunday.
EU Internal Market Commissioner Frits Bolkestein planned to give the German government an ultimatum by the beginning of April to scrap the so-called "VW law", which caps shareholder voting rights at 20 percent regardless of the size of their stake, Focus said, citing sources close to the commissioner.
If Germany did not show in the next two months a willingness to change the law that gives the state of Lower Saxony, which holds just under 20 percent of VW's shares, a de facto veto over any unwanted takeover, he would take legal action, Focus said.
The EU in January delayed indefinitely a decision on whether to pursue legal action against the law, as it sought to avoid another damaging row with Germany following disagreements over Berlin's lack of respect for the bloc's rules on limiting budget deficits.
Sources said at the time that members of the EU executive had been worried about the social impact of any move against the law, which Germany, the EU's biggest member state, says protects jobs.
The EU had been expected to launch a second phase of legal action, which involves a formal warning to Germany to change the law or face legal proceedings at the European Court of Justice, the EU's highest court.
The Commission, which has already warned Germany once that the law breaches EU rules on the free movement of capital and investment, has taken action against a range of countries over rules which give governments blocking stakes -- so-called golden shares -- in key, formerly state-owned firms.