Barroso attacks France and Spain over 'absurd economic nationalism'

Jose Manuel Barroso, the European Commission President, has attacked the "absurd" tendency towards economic nationalism in EU member states, putting him on course for a fight with Spain and France ahead of tomorrow's meeting of government heads.

While plans to forge a common European energy policy are at the top of the summit agenda, governments in Madrid and Paris stand accused of adopting a protectionist stance over the ownership of utilities.

The row over Spanish and French efforts to protect "national champions" in the energy market has crystallised the debate over how to react to the challenges of globalisation. Madrid and Paris have backed mergers of domestic utilities, heading off bids from firms based in other European nations.

Ahead of the summit Mr Barroso said economic nationalism is unacceptable, adding: "We cannot build barriers against each other in a single market - that would be absurd." It is because energy is a "strategic sector that we need a European strategy", the Commission president added.

The Commission has questioned the Spanish government's move to permit a merger between its energy giant Endesa and Barcelona-based Gas Natural, which will head off a rival takeover from the German conglomerate E.ON.

France has been questioned about its decision to sanction the merger of Gaz de France and Suez, thereby heading off a bid for Suez from Italy's Enel.

The French government's action has infuriated Italian politicians, one of whom compared it with the economic nationalism that preceded the First World War.

Italy's premier, Silvio Berlusconi, is expected to grandstand on the issue at the summit, although this is perhaps partly in the hope of improving his chances of being re-elected in next month's Italian elections.

However, Commission officials believe that Spain's action constitutes a more clear-cut breach of EU internal market rules, which aim to ensure a free movement of capital through European countries. While the Spanish government changed the law in order to give powers to its regulator to block a foreign bid, French intervention may be much more difficult to prove.

The row over economic nationalism is likely to overshadow calls for a common EU stance over its main energy supplier, Russia, and targets for an increase in non-fossil fuel energy. Mr Barroso has also proposed the creation of a European regulator to help free-up the market in energy.