A deal was clinched yesterday that allows the French state to sell the 21 per cent stake it acquired in power engineering group Alstom in a controversial financial rescue operation.

French building group Bouygues said it was buying the stake in the high-speed train and power-station maker for two billion euros (£1.4 billion).

Bouygues also intends to take a 50 per cent holding in Alstom's hydro-equipment business.

With the deals, Alstom - which faces a £1 million claim from former workers at the Washwood Heath train-making operation in Birmingham which it closed down last year - has met all conditions set by the European Commission.

Siemens chief executive Klaus Kleinfeld said his company had clearly expressed its interest in taking a stake in Alstom, but it had not been approached by the French government over the sale of its holding.

Bouygues and Alstom said they would be better able to win orders for international turnkey projects for large infrastructure deals or power stations, including nuclear plants.

Alstom needed to find a partner for the hydro business as one of the conditions set by the European Commission for a French state-orchestrated financial rescue package when it skirted bankruptcy in 2004.

The European Commission had also stipulated that France sell its stake in Alstom before the end of 2008.

Bouygues has for long been considering a third activity alongside its telecommunications and construction business.

It has stakes in France's largest commercial broad-caster TF1 and phone operator Bouygues Telecom, and was long rumoured to be interested in taking a stake in state-owned nuclear technology group Areva before the French government ditched partial privatisation plans in late 2005.

A Finance Ministry source said France would make a capital gain of 1.26 billion euros (£875 million) on the sale.

"Bouygues' investment in A lstom fully meets my objective of associating a reference shareholder with a long-term view, which will contribute to the stability of our capital structure," Alstom chairman and chief executive Patrick Kron said.

Bouygues said the Alstom shares would be acquired at 68.21 euros (£47.37) each, w hich compares with Wednesday's closing price of 69.80 euros (£48.47).

Alstom's power generating business employs 700 people at Rugby and a further 240 at Stafford. n Britain has learnt from harsh experience that resisting protectionism is the key to prosperity, Bank of England Governor Mervyn King said yesterday, as EU nations face criticism for trying to scupper takeover bids.

Speaking to the Treasury Committee, he said politicians, trade unions and business groups deserved a "pat on the back" for allowing Britain to fully engage in free global trade, unlike some other countries.

"More than any other country in the world, Britain has resisted the temptations of protectionist, popular sentiment," he insisted. "Parliament, the trade unions and the CBI have all not tried to play the protectionist card. And I think they deserve enormous credit for that."

Mr King said Britain's will-ingness to embrace globalisation stemmed from the hard-ship it suffered in the 1970s, when the oil crisis drove inflation rates into double digits while trade union action forced the country onto a three-day working week.