The Czech presidency of the European Union called on Monday for an emergency summit on the economic crisis as a row between Prague and Paris escalated over French plans to help its ailing auto sector.
French media said France and Germany had sought the meeting, while Czech Prime Minister Mirek Topolanek said French President Nicolas Sarkozy's behaviour in the dispute had threatened its ratification of the Lisbon Treaty revamping EU decision-making.
Sarkozy, whose government is due to unveil the auto rescue package later on Monday, enraged the Czechs last week by suggesting French car companies should locate plants at home rather than in the Czech Republic.
Splits have also emerged among other EU nations on how to halt the descent into recession after last year's credit crunch, with diverging views on what to do with the toxic assets that have drained confidence out of the global financial sector.
Urging EU leaders to gather for special talks later this month, Topolanek said Sarkozy's attitude risked casting the 27-nation bloc 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," 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.
Separately, the European Commission said such a meeting could take place in late February and prepare a subsequent, long-scheduled EU summit due for March 19-20 in Brussels.
The row risks overshadowing a meeting of euro zone and EU finance ministers on Monday and Tuesday at which officials are also to discuss when to start tightening budget policy and their message to forthcoming G7 and G20 meetings on the economy.
"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.
BREAKING THE SPIRAL
Separately, EU Monetary and Economic Affairs Commissioner Joaquim Almunia stepped up calls on EU countries to agree on the treatment of "toxic" financial assets, the securities seen as of questionable value and which were behind the credit crunch.
"Irrespective of whether action takes the form of a 'bad bank' or an insurance scheme, what matters first and foremost is that we agree on which assets will be eligible and how to value them," Almunia wrote in a commentary in the Wall Street Journal.
He said he hoped for a recovery later this year but added:
"For this to happen, the immediate and most urgent priority is to break the spiral of a deteriorating economic outlook creating feedback effects on financial activity and back again onto the real economy."
Sarkozy is due to meet the heads of top car firms later on Monday and French newspapers said he will announce the government will lend around 6 billion euros ($7.7 billion) to two carmakers to help them cope with the financial crisis.
The credit would be extended on the basis of preferential rates to Renault <RENA.PA> and Peugeot Citroen <PEUP.PA>, French daily Le Figaro said, without citing a source.
"BRUTAL PROTECTIONISM"
The European Commission, which is tasked with ensuring that EU rules are upheld, has yet to give its view of the legality of any requirement that aid recipients refrain from relocating business outside France.
"The internal market is part of the solution to the economic and financial crisis," a Commission spokesman told a regular briefing, referring to EU rules guaranteeing the right to free movement of people, goods and capital.
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.
