BERLIN, May 17 (Reuters) - The head of the German region of Lower Saxony, a keyAG shareholder, said on Saturday that the car giant could be subject to a hostile takeover if a law protecting it is abolished.
"The law is a guarantee that the company can stay as it currently is," Lower Saxony Prime Minister Christian Wulff told Welt am Sonntag newspaper.
European Internal Market Commissioner Frits Bolkestein is concerned that certain provisions of the law could restrict investment from other member states, violating EU treaty rules on the free movement of capital and the right of establishment.
Chancellor Gerhard Schroeder has defended the law which could give Lower Saxony, where Schroeder used to be prime minister, a blocking minority by capping shareholder voting rights at 20 percent.
"That someone can buy up bits of VW in eastern Europe then butcher the rest in Germany is hardly in the interests of a German politician," he said.
This month Germany was given an extra month to respond to legal steps by the European Commission, which polices competition policy throughout the European Union, against a law which protectsfrom possible takeovers.
Analysts say the VW law is aimed at safeguarding more than 150,000 jobs in Europe's biggest economy and making sure the manufacturer does not fall under the control of a foreign rival.
EU treaty rules say capital should flow freely in the 15-nation bloc. The Commission is conducting a campaign against restrictions to cross-border investment to boost dwindling merger activity and raise competitiveness.
It has also taken on rules giving governments special stakes in companies, known as golden shares.