The French authorities agreed that a €6 billion loan for French car manufacturers Renault and Peugeot-Citroën would not contain any conditions related to either the location of their factories or preferences for French suppliers when making purchases.
In particular, the French have agreed to abandon a clause in the plan requiring manufacturers not to close production sites in France for the duration of the loan.
This represents a U-turn for France, with Paris effectively agreeing to withdraw the most controversial elements in the plan.
The French authorities specifically sought to calm tensions ahead of today's European summit in Brussels. Czech Prime Minister Mirek Topolánek called an emergency meeting on the economic crisis soon after the French auto bailout was announced, stating that today's summit would focus on rejecting protectionism. But France and Germany believe the emphasis should rather be on reviving frozen credit markets.
Big car manufacturing states like Germany, Slovakia and the Czech Republic were angered by French President Nicolas Sarkozy's suggestion that carmakers receiving sizeable government subsidies should shift their production back to France from countries with lower wages.
"We do not want a Europe divided along a North-South or an East-West line. Pursuing a beggar-thy-neighbour policy is unacceptable. That the internal market remains united is of vital importance," Topolánek said in a statement ahead of the summit.
For its part, the European Commission has been in frequent contact with the French authorities since the dispute over the announced plan broke out on 9 February.
Neelie Kroes, the EU's competition commissioner, welcomed the French announcement, declaring herself "satisfied with the guarantees set out by the French authorities on the absence of protectionist elements in the plan". She stressed the importance for the Commission of removing all ambiguities in this case, insisting that Europe must not turn to protectionism.
The EU executive announced its intention to closely monitor the plan's implementation.
