WRAPUP 4-EU summit called as protectionism row heats up

Mon Feb 9, 2009 10:10pm GMT

    * Czech EU presidency calls extra economic crisis summit 
    * France unveils 6 billion euro car aid package 
    * EU Commission plans to vet French auto aid plans 
     
 (Adds French minister saying no protectionism) 
    By Jan Strupczewski and Jan Lopatka 
    BRUSSELS/PRAGUE, Feb 9 (Reuters) - 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 euros ($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 percent 
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-neighbour" 
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. 
 
    TOXIC ASSETS 
    Governments have committed hundreds of billions of dollars 
worldwide to keeping the banking industry afloat after a boom 
that turned to bust when the U.S. housing boom did likewise -- 
turning trillions of mortage debt derivatives into toxic assets 
that are now weighing on the balance sheets of banks across the 
industrialised 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 programmes," 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 criticised 
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. 
 (Reporting by Jan Lopatka in Prague and Peter Laca in 
Bratislava, Foo Yun Chee; Writing by Mark John and Brian Love) 
((mark.john@reuters.com; +32 2 287 6841; Reuters Messaging: 
mark.john.reuters.com@reuters.net)) 
 ($1=.7703 Euro) 
  Keywords: EU ECONOMY/  
    
 
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