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Sarkozy Barb Sets Off EU Protectionism Firestorm

EU Commission Chairman Jose Manuel Barroso (right) and Czech Prime Minister Mirek Topolanek at EU headquarters in Brussels on February 11.
EU Commission Chairman Jose Manuel Barroso (right) and Czech Prime Minister Mirek Topolanek at EU headquarters in Brussels on February 11.
The global economic downturn has begun to take a toll on EU solidarity, with a potential rift taking shape that could shake the EU to its foundations.

It emerged after France broke ranks last week with other EU governments and became the first member state to flirt openly with protectionist policies, with President Nicolas Sarkozy publicly suggesting that car maker Renault should pull its production out of the Czech Republic.

Made against a backdrop of economic crisis that is expected to shrink French GDP by nearly 2 percent this year and push the jobless rate to nearly 10 percent, Sarkozy's televised broadside angered the current EU Presidency and risked challenging the authority of the EU's executive arm.

Incensed, the Czech Republic -- which currently holds the EU's rotating presidency -- has already called an emergency summit in response that's been set for March 1.

Pointed Responses

In his remarks, on February 5, Sarkozy identified the Czech Republic as one of the countries that "unjustifiably" hoards economic activity that could take place in France.

"If Renault sets up a factory in India to sell Renaults in India, that's justified," Sarkozy told French television. "But setting up such a factory -- without citing names -- in the Czech Republic in order to sell cars in France, that is not justified."

The French president had already announced a 6.5 billion-euro preferential loan package for domestic car manufacturers -- which the European Commission is studying to see if it breaches EU competition rules.

Czech Prime Minister Miroslav Topolanek countered that "it is these kind of statements, made by some European statesmen, that will lead to a higher level of protectionism among individual states, which will absolutely undoubtedly lead to an escalation of similar actions and in the end only extend the crisis," according to Reuters.

Neighboring Slovakia felt slighted as well. Prime Minister Robert Fico reportedly warned that "if one country starts behaving like this -- for example, France -- then we will send [state-controlled gas distributor] Gaz de France home."

The world's largest single market, EU leaders have appeared anxious to defend global free trade. The bloc was critical of the early versions of U.S. President Barack Obama's stimulus package, large parts of which were tied to what has become known as the "buy American" clause. Fearing tit-for-tat measures from its trading partners, the U.S. administration has now toned down the effects of the clause.

European Commission President Jose Manuel Barroso cautioned after a February 11 meeting with Topolanek that the EU must not succumb to protectionism.

"At a time of crisis, some think that retrenching within their own group, their own region, their own country, is the right response; but this carries the risk of unilateral reactions leading to a vicious, downward spiral," Barroso said. "We have gone through such unhappy experiences in the past and that is why we must now safeguard against their repetition. This is the raison d'etre of the European Union -- a common European approach."

Bruising Battle

Critics could argue that Sarkozy's actions could hardly have come at a more inopportune time, with EU governments coming under intense pressure to protect their markets from foreign competition.

Britain, for example, has been plagued by wildcat strikes at oil refineries, with local employees protesting, among others, against French company Total for hiring workers from Italy and Portugal. "British jobs for British workers," used by Prime Minister Gordon Brown in a trade union speech in 2007, has become a popular phrase; but the British leader has dissociated himself from its connotation in today's context.

Sarkozy's remarks also risk damaging the EU's chances of resolving a five-year structural crisis. The Czech Republic, alongside with Ireland and Poland, has yet to ratify the Lisbon Treaty, designed to streamline the bloc's decision-making and otherwise improve its ability to respond to global challenges.

Paradoxically, those are goals closely associated with long-term French ambitions and priorities. The Czech leadership, on the other hand, is seen as among the most euro-skeptical in the EU.

The irony was not lost on Topolanek, who noted at the weekend that "if someone wanted to seriously threaten the ratification of the Lisbon treaty, he could not have chosen better means and time for it."

Sarkozy's comments come as a blow to those who regard the bloc's raison d'etre as predicated on the idea that economic cooperation will eventually bring about political reconciliation and unity -- as became the case with France and Germany after World War II.

The EU's economic ground rules are condensed into the "four freedoms," which stipulate that nothing must interfere with the free movement of capital, goods, services, or people within the union.

The European Commission, the bloc's executive arm led by Barroso, is responsible for ensuring those ground rules are not violated. Sarkozy's remarks are thus likely to be perceived by some as an indirect challenge to the commission's authority.

'Old' And 'New'

The Czech Republic is the first postcommunist member to hold the bloc's presidency. France, on the other hand, is a lead nation in what is sometimes referred to derisively as "Old Europe."

Prague took over the EU presidency from Paris in January, and French officials have repeatedly questioned the Czech Republic's ability to run the EU or respond to the current economic crisis. French diplomatic initiatives have clashed more than once with the Czechs' official missions since that handover.

"If big countries continue to behave in a protectionist way they will only repeat the scenario of 1930s," Topolanek told the Czech presidency's website in an online chat on February 10, "I recommend the leaders of these big countries to take a quick glance over the history books."

Sarkozy has found it particularly difficult to accept Czech leadership on economic issues, given that the country is not a member of the bloc's common currency, the euro. Diplomats in Brussels say the French government had on February 9 attempted to convene a separate euro-zone summit that would have excluded the Czech Republic -- but was beaten to the punch by Topolanek's announcement.

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