Thursday, February 12, 2009

France says auto bail-out not protectionist

France on Wednesday fiercely defended its plan to pump almost nine billion euros into its struggling carmakers after EU countries labeled it protectionist and called a crisis summit.

President Nicolas Sarkozy announced plans 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 sack French workers.

Speaking in Kuwait City during a tour of Gulf states, Sarkozy said the plan had "nothing to do with protectionism" and that other European governments were welcome to put up funds to keep French plants in their markets.

"One million cars were built elsewhere than in France in three years," Sarkozy told a news conference. "It is my responsibility to keep jobs in France."

The European Commission, which has yet to give the loan its approval, warned on Tuesday that the plan might break European Union laws against protectionism, amid sniping from the Czech Republic, Slovakia and German industry.

The French manufacturer Peugeot closed their UK manufacturing facility back in 2007, whilst they started to build in lower cost plants in Eastern Europe. At the time of closure the UK operation was already more efficient than its French counterparts. Now at a time when when Peugeot Citroen are announcing record losses and sweeping job cuts, it would seem the French Government is offering financial support as long as production in France is maintained. This would appear to "fly in the face" of the European ideal, or even break European Laws.

France, along with Germany have long been the bearers of the European banner, whilst countries like the UK have been criticised for their lack of European zeal. It is amazing how pragmatism can overtake idealism in the face of crisis. I think the French Government will have to be a little more cautious in future about their claimed "European credentials".

Along with the USA's "buy American" campaign, and recent wildcat strikes in the UK over foreign workers, we could be seeing the start of a new phase of International protectionism.

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