A 14-year quest for common European Union rules on takeovers has suffered another setback after member-states failed to reach consensus on the controversial measure.

EU officials believe breakthrough is impossible before September. A meeting of high-level diplomats tomorrow is set to refer the issue to a lower-level working group to discuss over the summer. "There's a kind of stalemate," said a diplomat from Italy, which will take over the EU's rotating presidency next month.

Agreeing the proposed takeover directive is one of Mr Frits Bolkestein's, the EU's internal market commissioner's, objectives. He believes rules banning mechanisms such as "poison pill" defences would move the EU towards an integrated capital market. But after a previous directive was rejected in an agonisingly close vote in the European Parliament in 2001, Mr Bolkestein's efforts to revive the measure have been frustrated by a series of deals between member-states, particularly Germany, which lobbied members of the European parliament before the vote in 2001.

A working group late last week showed the extent of the divisions within the EU. The most sensitive parts of the legislation - articles 9 and 11 dealing with poison pill defences and multiple shareholding rights - split member-states. Spain, Austria, Greece, Italy, Portugal, France and Ireland said they would oppose the legislation if these articles were withdrawn, but Germany and the remaining EU states said the articles could or should be eliminated. - (Financial Times Service)