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Page last updated at 12:21 GMT, Tuesday, 10 February 2009

EU moves to prevent protectionism

Renault Clio assembly at Flins, near Paris
France is trying to secure the jobs of car workers and their suppliers

Fears of increasing protectionism in Europe are overshadowing a meeting of EU finance ministers.

The Czech EU presidency has announced plans for an informal EU summit before the end of this month to co-ordinate responses to the economic crisis.

"The biggest risk at the moment is the risk of protectionism," Czech Finance Minister Miroslav Kalousek said.

The European Commission is concerned about a French bail-out for carmakers, and is seeking clarification.

Commission spokesman Jonathan Todd said there were "a number of concerns" about the French state aid, which was announced on Monday. The commission wants to ensure France's actions do not violate EU competition rules.

France announced 6.5bn euros ($8.5bn, 5.7bn) in emergency government loans to its carmakers.

Peugeot-Citroen and Renault will receive 3bn euros each, while Renault Trucks, which is owned by Sweden's AB Volvo, will get 500m euros.

In exchange, they pledged to keep French plants open, President Nicolas Sarkozy said.

Czech-French tensions

President Sarkozy's call for French carmakers to keep production at home has alarmed Czech leaders.

Last week he said carmarkers receiving state aid should keep production in France and consider relocating their plants in the Czech Republic back to France.

Czech Prime Minister Mirek Topolanek criticised Mr Sarkozy's stance, saying it underlined the need for co-ordinated European action to prevent "beggar-thy-neighbour" policies among the 27 member states.

"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]," Mr Topolanek said.

Lending blockage

Commenting in Brussels on Tuesday, UK Chancellor Alistair Darling said "getting lending going again is the most important thing we need to focus on in the United Kingdom, Europe and indeed throughout the world".

He also said "it is very, very important that we don't have protectionism".

"It is entirely possible and indeed desirable that countries support their own economies - France and Germany are supporting their car industries and so are we - provided that you do those things together. Each country needs its neighbours more than ever before."

The ministers are also discussing what to do with the problem of toxic assets accumulated by banks, which are contributing to the general paralysis in lending.

One of the options is to set up a "bad bank" to soak up toxic assets.

"There will not be an agreement on a single methodology of how to deal with toxic assets today. We hope that we will advance in these discussions and we will ask the (European) Commission to further deal with it," said Mr Kalousek, quoted by Reuters news agency.

Mr Darling said "the option of a split between a good and bad bank is open.

"So I think most countries will want to keep all options open."

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