The measures, announced on Monday (9 February), involve the payment of a three billion euro loan to two carmakers - PSA Peugeot-Citroën and Renault - and a further 500 million euro loan to Renault Trucks, which is owned by AB Volvo of Sweden.
"This is not a gift. It is not a subsidy. It is a loan offered at an interest rate of 6%," Sarkozy said. The French president added that "Renault and PSA have made a commitment […] to close no sites over the duration of the loan and to do everything to avoid redundancies".
The announcement immediately caused uproar among EU leaders, who denounced the measures as protectionist.
"What Nicolas Sarkozy said is unbelievable," said Czech Prime Minister Mirek Topolánek, who called an emergency EU summit aimed at tackling the "protectionist steps and statements" made by some EU leaders.
Topolánek added that the French plan could also have negative consequences on the ratification of the Lisbon Treaty in the Czech Republic. "If somebody wanted to seriously threaten ratification of the Lisbon Treaty, they couldn't have picked a better means or time," he said, according to Reuters.
Eurogroup chair Jean-Claude Juncker called for better European economic coordination as some countries prepare individual plans to fight the global downturn. "I'm a bit concerned that member state after member state is arranging its own plans and programmes," said Juncker, who is also premier and finance minister of Luxembourg.
Meanwhile, the Commission said it would look closely at the French plan. "The Commission will need to scrutinise very carefully details of the subsidies and the conditions attached to make sure of their compliance with state aid and single market rules," said Jonathan Todd, competition spokesman at the EU executive.
However, German Chancellor Angela Merkel seemed to play down protectionist fears in a joint letter with Sarkozy addressed to Topolánek and the European Commission. The emergency EU summit, they write, should focus on "restoring credit" as "a key priority". "The solutions may vary from one state to another. But [...] the guidelines and principles must be approved together to ensure the proper functioning of the common market and avoid repercussion in the [European] Union," the letter said.
Swedish reaction
Swedish Prime Minister Fredrik Reinfeldt, whose country assumes the rotating EU presidency on 1 July 2009, said yesterday (9 February) in Brussels that he was "very worried" at the growing tide of protectionist economic measures in Europe.
Appearing with European Commission President José Manuel Barroso, Reinfeldt slammed those EU leaders who are seeking to implement different "forms of support" for their own national industries.
In a thinly-veiled criticism of France, Reinfeldt said "if everyone seeks to only protect their own economy, then Europe will only become poorer and fall further behind in this economic crisis".
Sweden is known to be one of the most ardent opponents of protectionism among the EU 27, and has expressed consistent dismay at President Sarkozy's frequent criticisms of the pro-free trade stance of some EU officials.
As early as last year, long before the worst effects of the global financial crisis took hold, the country's trade minister Ewa Björling described as "scary" the rise of protectionist rhetoric among some European leaders. And indeed, as recently as last month, Björling reiterated that more protectionism is "the last thing that the world economy needs".
Swedish EU Presidency in focus
As well as the financial crisis, the Swedish PM spoke openly of other priorities for Sweden's fast-approaching EU presidency.
Reinfeldt acknowledged that Sweden would take over the EU reins at a "special" time. "It comes at a time when there will be a shift in the [European] Parliament with the June elections, a shift in the Commission, and there might also be a shift in the treaties from Nice to Lisbon," he said.
Reinfeldt further explained that the issue of climate change would be the "number one topic" of his EU presidency, with the Swedish PM hoping to oversee a global climate agreement at the Copenhagen conference in December.
He also went into further detail on other Swedish presidency priorities, notably the so-called "Stockholm programme" for policies on migration and international crime, and the "Baltic Sea Strategy", which puts in place a plan for "how Europe can work better with the countries surrounding the Baltic Sea".
Despite being questioned by the press, Reinfeldt would not be drawn on the subject of Sweden's potential entry into the euro zone.
Indeed, Commission President Barroso seemed to offer mixed messages to the Swedish PM on the euro issue, claiming on the one hand that "all EU member states are equal, whether they are in the euro zone or not," and moments later arguing that sharing the burden of the economic crisis through the common market and currency was Europe's great trump card. "Europe keeps us safe," he said.
