EU summit fails to address protectionism fears

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European leaders have backed plans to forge a common energy policy but failed to quell fears that the EU's single market could fall victim to a new wave of protectionism.

A summit in Brussels ended without direct confrontation over claims that France and Spain are preventing firms from other EU countries from entering their energy markets. It also failed to back the creation of a pan-European energy regulator, promising only better co-ordination of existing national regulation.

Yesterday's declaration is designed as a first step towards protecting the EU's citizens from future crises by pooling resources and using EU negotiating muscle on world energy markets. The leaders promised to fulfil their pledge to liberalise the EU energy sector by 2007, and the president of the European Commission, Jose Manuel Barroso, argued: "We are on the right track in Europe. There is no time to lose."

The agreement included a pledge to have a regular energy review, developing an external energy policy and boosting plans to diversify energy sources. The issue of nuclear power will be left to member states.

Underlying tension over economic nationalism and suspicion of Anglo-Saxon liberalism was underlined by Jacques Chirac, the French President, who defended his walkout on Thursday from the summit in protest at a Frenchman's decision to speak in English.

M. Chirac said that, after working to secure the position of French as a global language, he was "deeply shocked" when a French business leader, Ernest-Antoine Seillière, spoke in English at the summit on Thursday. M. Chirac left the meeting, returning only when the president of the European Central Bank, Jean-Claude Trichet, began speaking in French.

The Austrian presidency of the EU worked hard to prevent a direct row over claims that the French government orchestrated the merger between Gaz de France and Suez to prevent a takeover by Italy's Enel. In the event, the Italian premier, Silvio Berlusconi, did not speak during the formal dinner discussing energy on Thursday night. As the row simmered, the French President insisted, however, that France remained more open to foreign investment than the UK, Germany or the US.

Blair: how No 10 sets the example

Tony Blair drew attention to the liberalisation of Britain's energy market and held it up as an example to the rest of Europe, saying: "The electricity in No 10 Downing Street is supplied by a French company. The water by a German company. The gas is supplied by four companies, three of which are not British."

He said electricity in most of London was supplied by Electricité de France (EDF), 80 per cent-owned by the French state; Thames Water was owned by RWE, a German utility. Gas supplies were provided by British Gas, Powergen, (owned by German's EON), Npower (RWE) and EDF.