The tie-up, announced to great fanfare in 2017, was hailed as the birth of a much needed European industrial champion, an Airbus for the railways to face down a formidable Chinese rival.
But, after months of investigation and a rejected offer of concessions from the companies, the European Commission confirmed on Wednesday it had derailed the proposal.
France was left furious by the decision.
French Finance Minister Bruno Le Maire on Wednesday conceded the likelihood of a veto, terming the expected decision “an economic mistake”.
Such a decision “will serve the interests of China,” he told France 2 television.
The EU's powerful anti-trust sheriff, Margrethe Vestager told an industrial conference in Brussels ahead of the decision:”It is very important not to fall into the trap to think that big is always better.”
While she did not specifically refer to the case, Vestager said markets are stronger if their survival “does not depend on one or very few giant companies.”
The likely veto has infuriated Paris, where ministers lobbied hard for the tie-up, seeing it as a necessary defence to compete against China's state-backed CRRC.
The red light by Brussels leaves a political scar on Vestager in the eyes of France and Germany after years of her being seen as an EU rising star
Vestager was hailed as a European hero after taking on US tech giants Google, Facebook and Apple, which she ordered in 2016 to pay 13 billion euros in back taxes.
She had been tipped to take an even more senior role in Brussels after elections in May, possibly as commission chief.
Brussels believes the alliance would crush smaller groups and hike prices for railways, with the merged firm in a commanding position for selling signalling equipment and high-speed trains.
Competition authorities in Britain, the Netherlands, Belgium and Spain have all firmly backed Vestager, afraid of increased costs for their national railways.
Backers of the tie-up want Vestager to look beyond Europe to the rise of CRRC, itself born of a merger of Chinese companies, before it is too late.
“Aren't there areas such as aviation, railways, banks where you have to take the global market as a reference rather than the European one?” pleaded Economy Minister Peter Altmaier on Tuesday.
Caught in a political firestorm, commission head Jean-Claude Juncker defended the EU's competition policy on Tuesday, pointing a finger at those
“who are saying that the commission is composed of blind, stupid, stubborn technocrats.”
“We will never play politics or play favourites when it comes to ensuring a level playing field,” Juncker said.
The merger proposal was to create a rail behemoth with operations in 60 countries and annual turnover of 15.6 billion euros ($17.8 billion).
Alone, CRRC's annual revenues of 26 billion euros outweigh the three Western heavyweights Bombardier, Siemens and Alstom, each of which brings in
around eight billion a year.