Page last updated at 18:28 GMT, Friday, 20 March 2009

Renault jobs row rocks EU summit

Renault Clio assembly at Flins, near Paris
Renault says it is shifting some production to France to meet demand

A new row over French protectionism has broken out, as EU leaders hold a summit in Brussels on the economic crisis.

It followed the news that carmaker Renault was moving some production from Slovenia to create 400 jobs in France.

The European Commission said it would seek urgent clarification. It comes only weeks after the EU agreed France could give state aid to its carmakers.

The row may overshadow an EU pledge to double to 50bn euros an emergency fund for non-eurozone members in trouble.

In addition, EU leaders said they would provide up to 75bn euros ($102bn; 71bn) in loans in an effort to boost the International Monetary Fund's (IMF) capital to $500bn (344bn).

But the bloc resisted US calls to spend even more to revive national economies.

The two-day meeting took place as the world's biggest economies prepare for the G20 summit in London on 2 April.

'Worst moment'

The BBC's Oana Lungescu in Brussels says the row over Renault could not have come at a worse moment for the EU, just as its leaders are calling on the US and others to tackle the global crisis by avoiding all forms of protectionism.

World leaders will meet next month in London to discuss measures to tackle the downturn. See our in-depth guide to the G20 summit.
The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the US and the EU.

The argument erupted after French industry minister Luc Chatel told French radio that Renault would relocate part of its production from Slovenia to a plant at Flins, near Paris, creating 400 jobs there.

A Renault spokeswoman said the company intended to increase production both in Slovenia and France and the shift was intended to meet a shortfall in capacity at its Slovenian plant.

It denied the move was linked to a pledge to keep jobs in France in exchange for state aid.

But EU competition commission Neelie Kroes told the BBC she was highly surprised and was seeking urgent clarification from the French authorities.

Ms Kroes said she had received a pledge from Mr Chatel just a few weeks ago that an $8bn state bail-out for carmakers would not be linked to moving jobs to France, our correspondent reports.

Have the French been caught with their pants down?
Europe editor Mark Mardell

If the aid proves to be linked, Ms Kroes said, it is illegal under EU rules and should be paid back.

European Commission president Jose Manuel Barroso told a news conference at the end of the summit: "We were told that Renault is to increase production in France and won't be leaving any other country. But we have to verify it.

"So far we are not confirming that it is against the internal market rules."

President Nicolas Sarkozy told reporters that there would be no job losses in Slovenia as a result of the move, which was driven by a need to increase production of cheaper models.

"This is not taking work away from our Slovenian friends, and this creates jobs at Flins. This is exactly what I wanted," he said.

European Commission's Jonathan Todd: 'It did very much sound like protectionism'

Last month, the French auto bail-out plan sparked a protectionism row after Mr Sarkozy suggested on TV that the money should not be used to rescue French-owned factories in Eastern Europe.

Speaking after the summit, UK Prime Minister Gordon Brown said: "We must remain vigilant at all times to any form of protectionism - covert or overt."

The latest argument comes as figures from the UK reveal the number of new cars produced there fell by a record 59% in February, year-on-year.

The drop has led to renewed calls in the UK for more government help for British carmakers.

'Voluntary loan'

At the end of the Brussels talks, EU leaders called on other members of the G20 to double the IMF's resources, saying that co-ordinating international action was critical to "a swift return to sustainable economic growth".

Trying to outdo one another with promises will certainly not bring any calm to the situation
Angela Merkel
German Chancellor

Czech Prime Minister Mirek Topolanek, whose country currently holds the EU's rotating presidency, said the bloc was prepared to pay a third of the increased funds for the institution, with a voluntary loan of 75bn euros.

Mr Topolanek also announced that EU leaders would double the emergency funding available to member states outside the 16-nation eurozone who were "particularly hit by the crisis".

Hungary and Latvia have already received nearly 10bn euros (9bn) to deal with their balance of payments crises.

Romania is the next member seeking a bail-out and Lithuania is likely to follow suit, our correspondent in Brussels says.

Earlier, EU leaders ruled out an extra stimulus package, despite calls from Washington for one.

Mr Topolanek warned that any more deficit spending was "a deadly idea", adding that EU leaders were awaiting the results of a 200bn-euro stimulus package for 2009 and 2010 agreed in December.

The European Commission says that if member states' increases in welfare spending are included, the measures total 400bn euros - equivalent to 3.3% of the bloc's gross domestic product.

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