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AFP – France fiercely defended on Wednesday its plan to pump almost nine billion euros into its struggling carmakers, at the risk of sparking a full-scale European Union dispute over protectionism.
President Nicolas Sarkozy wants to lend PSA Peugeot Citroen and Renault three billion euros (3.9 billion dollars) each on top of other measures, in exchange for a promise not to shut French plants or cut French jobs.
The Czech presidency of the European Union has called for a summit at the end of the month to encourage leaders to say clear ‘no’ to protectionism.
The European Commission, which has yet to give the loan its approval, warned on Tuesday that the plan might break EU laws against protectionism, amid sniping from the Czech Republic, Slovakia and German industry.
It’s not protectionism, it’s the defence of our industry and the defence of our jobs, Minister for European Affairs Bruno Le Maire told France Info radio, insisting there was nothing illegal about the plan.
Nevertheless, in its first response, France came out fighting.
Le Maire said the plan did not break the rules of the EU internal market and added that if the market had worked as well as it should then it would have provided the liquidity that Peugeot and Renault needed.
Motor manufacturing is a vital pillar of French industry, directly employing one in 10 members of the workforce, but the sector has been hard hit by the global economic crisis and the collapse of consumer credit.
Aides to French Finance Minister Christine Lagarde said she would invite her new German counterpart Karl-Theodor zu Guttenberg to Paris to reassure him that the French measures were not inspired by protectionism.
The firm plans to cut its workforce at European plants by 11,000 through voluntary redundancies and non-renewal of contracts.
Peugeot-Citroen said on Wednesday it had lost 343 million euros in 2008 — having made 885 million in profit the previous year — and forecast that the European market for new cars would shrink by another 20 percent in 2009.
Paris sees Renault and Peugeot as national champions, although they only produce around 40 percent of their vehicles at home, running major plants in Spain, Italy, Romania, Portugal, Slovakia and the Czech Republic.
France is, of course, our biggest country in terms of employees, but we have lots of staff in other countries which we are currently reducing quickly, group chairman Christian Streiff told reporters. .
Job losses will further anger Prague and Bratislava and the German industrial federation BDI has also said it is highly alarmed.
We want to stop factories from relocating abroad, and if possible bring them back home, Sarkozy said.
Last week, he stirred the controversy by making it clear that he wants French firms to stop sending jobs and plants abroad.
France’s plan can only go ahead if the European Commission approves it, and its spokesperson on competition issues has already expressed concerns.
If we give money to the auto industry to restructure itself, it’s not so we can hear about a new plant moving to the Czech Republic or wherever. The commission is going to look very closely at the French plan.
We have certain concerns, Jonathan Todd told reporters on Tuesday.
Even in France, the bail-out has not been universally welcomed.
If there is an additional condition like keeping a production plant in France, that would make the aid illegal, he warned.
auto industry – EU – financial crisis – Nicolas Sarkozy – protectionism – rescue plan
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An editorial in the influential daily Le Monde attacked Sarkozy’s as an example of the dangerous turn that Europe is taking towards falling back into national isolation, with everyone for themselves