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EU summit called as protectionism row heats up

  The Czech presidency of the European Union, livid with French “protectionist” comments, said on Monday it was calling an emergency EU summit to discuss government responses to the economic crisis.

France, where President Nicolas Sarkozy last week suggested French carmakers move plants back home from the Czech Republic, meanwhile unveiled plans to help its ailing auto manufacturers with €6 billion ($7.8 billion) in government loans.

With recession biting, governments in Europe and well beyond have pledged to keep international trade channels open to avoid the protectionist mistakes of the Great Depression years, though fears that such pledges will not be respected are mounting.

Czech Prime Minister Mirek Topolanek said protectionist comments by Sarkozy drove him to call the summit, for which no date has been set but may take place this month. However, it seems France also wants a meeting. In a letter to Topolanek, dated Feb. 9 and seen by Reuters, German Chancellor Angela Merkel and Sarkozy said such a special meeting was needed. “The restoration of the supply of credit must be our top priority,” Merkel and Sarkozy wrote in the letter to the Czech EU presidency, a copy of which was obtained by Reuters.

On Monday, Sarkozy announced the signature of deal on car aid with the chiefs of PSA Peugeot-Citroen and Renault involving pledges to each of a 3-billion-euro 5-year loan at 6% interest. PSA and Renault said their firms would not launch job cuts in France this year, while a European Commission spokesman said the EU’s executive body would study the fine print of the rescue for compliance with EU rules.

Topalanek said Sarkozy’s attitude risked casting the 27-nation EU into a vicious circle of “beggar-thy-neighbor” actions to protect national economies. “The last impulse was the really selective and protectionist steps and statements of, among others, President Sarkozy, that led me to the intention to call this extraordinary council (EU summit),” Topolanek told a news conference in Prague. “It is these kinds of statements, made by some European statesmen, that will lead to a higher level of protectionism among individual states,” he warned.

The European Commission said such a meeting could take place in late February.


Governments have committed hundreds of billions of dollars worldwide to keeping the banking industry afloat after a boom that turned to bust when the US housing boom did likewise -- turning trillions of mortgage debt derivatives into toxic assets that are now weighing on the balance sheets of banks across the industrialized world and shrinking lending.

The International Monetary Fund says the economic downturn that has come hand-in-hand with the financial crisis is likely to be the worst since World War Two. The tension shown by Prague overshadowed Monday’s meeting of euro zone finance ministers. EU finance ministers meet on Tuesday.

Ministers were discussing budget policy and their message to forthcoming meetings of the G7 and G20 clubs of, respectively, rich and rich and developing economic powers. Some of those present said they were conscious of the need to resist protectionism and ensure Europe responded in synch.

“I am a little bit concerned that day after day member state after member state are announcing not only their own ideas but their own plans and programs,” said Luxembourg’s Jean-Claude Juncker, head of the 16-nation Eurogroup of euro currency users. “All this has to be better coordinated,” he told reporters.

French Economy Minister Christine Lagarde defended Paris in Brussels saying she would tell her colleagues “there is not a whiff of protectionism, that it’s really the aim to focus on research and development”.

Earlier, Slovak Prime Minister Robert Fico criticized Sarkozy’s remarks about a possible return of French car factories home and said his country, which hosts a plant owned by PSA Peugeot Citroen, warned of possible retaliatory measures.

“Calls for such brutal protectionism are not helping anyone,” he told reporters in Bratislava. “If one country starts behaving like this, for example France, then we will send Gaz de France home. We can use the money Gaz de France is getting as a shareholder in (Slovak gas company) SPP,” he added. (Reuters)