General Electric Co.’s (NYSE: GE) $16.9 billion bid for the power division of France’s Alstom has not gone down well with the government of French President François Hollande. The government is so unhappy that it passed a law giving itself the power to block foreign acquisitions of businesses that it deems to be in a strategic sector. The power business generates about 70% of Alstom’s revenue.

Reuters reported exclusively on Sunday that German industrial giant Siemens could make a bid for Alstom sometime this week. Siemens reportedly offered $14.5 billion in a deal that would exchange its rail business plus some cash for Alstom’s power assets.

According to Reuters sources, Siemens is now considering handing over all its rail business to Alstom. One source told Reuters that the French government could take a 10% stake in Alstom, up from its current investment of less than 1%.

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For both GE and Siemens the key may be what France’s government-controlled nuclear energy company, Areva, does. Areva is currently merging its offshore wind turbine business with Spain’s Gamesa, and the French government wants GE to continue to support both Areva’s current contracts to maintain steam turbines in the non-nuclear parts of the country’s 58 nuclear reactors and that GE will not block efforts by Alstom or Areva to export turbine technology.

GE’s CEO has agreed to work with Areva, but apparently the government is also pressing for GE to sell its locomotive division to Alstom, an unlikely outcome to say the least. GE’s main leverage with France is the threat of withdrawing its offer altogether, and there really is no strong reason why the U.S. company should not. GE’s power and water division has been struggling for some time now, but it posted strong results in the first quarter and the turnaround there is expected to continue.

Adding Alstom’s power business would speed up GE’s return to its roots as an industrial firm and exit from the finance business. But that will happen anyway, it will just take a little longer without Alstom.

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