France in protectionist row as Renault switches Slovenia jobs

France was embroiled in a protectionism row yesterday after the government announced that the assembly of some Renault cars would be shifted from Slovenia to the Paris area, creating 400 new jobs.

President Nicolas Sarkozy later insisted that the move would not cause any job losses in a fellow EU state, but the European Commission said it planned to launch an investigation.

M. Sarkozy infuriated eastern European members of the EU last month when he linked €6bn (£5.6bn) in cheap loans to the struggling French auto industry to a guarantee that car-making jobs would remain in France. He even questioned why French car firms needed plants in eastern Europe at all. Alarm bells rang in Brussels and across eastern Europe yesterday morning when the French Industry Minister, Luc Chatel, announced that production of some Clio cars would transfer from Slovenia to a giant Renault assembly plant at Flins in the Seine valley, west of Paris.

"Today, the Renault group will announce that it will repatriate the production of a vehicle that was until now made outside France to the Flins plant, which will be extra output for that factory," M. Chatel said. He claimed that this was a "first sign" that the French aid package to car manufacturers was working.

His comments appeared to confirm the worst fears of Brussels officials and east European governments that the principle of the European single market could be undermined by "economic nationalism" during the recession.

Renault later partly confirmed the announcement, but said that the 400 new jobs in France would not take any work away from Slovenia.

The Renault plant at Novo Mesto, Slovenia had already moved to its maximum pattern of three shifts, a spokeswoman said. Manufacture of an older model of Clio, the Clio II, was therefore being moved to France to cope with increased demand for the lower-priced car, she said.

At the end of an EU summit in Brussels, President Sarkozy also rejected suggestions that Renault jobs were being removed from Slovenia under French government pressure. "This does not take away one job from our Slovene friends," he said. The Renault decision did not come up at the Brussels summit, but was announced as the 27 EU leaders were agreeing a statement to "avoid all form of protectionist measures".

Mr Brown said: "We are an anti-protectionist European Union. We must remain vigilant at all times to any form of protectionism – covert or overt."

The European Commission said that it would seek further information from Paris on the transfer of Clio II production to France.

The EU Competition Commissioner Neelie Kroes said she was surprised by the French comments. "If this is the case, it is illegal aid," she told the BBC, adding that she was urgently seeking clarification from M. Chatel.

"I am highly surprised with this last message, for the same person ... wrote me not that long ago, less than a fortnight, to say the loan agreements with manufacturers would not contain any condition regarding either location of their activities or preference for France-based suppliers," she said. The 400 jobs "created" in Flins will in fact mostly go to Renault workers who are regarded as redundant, or are on part-time working, at other plants nearby.