FRANCE was facing European Union condemnation last night over plans to build up national champions to fend off cross-border takeovers.

José Manuel Barroso, President of the European Commission, told member states not to resort to “nationalist rhetoric” to create barriers against business mergers.

“I would like to appeal to a European sense of political responsibility on the part of our statesmen to avoid national or nationalist rhetoric,” he said.

His comments came as the row over cross-border takeovers escalated, with France vowing to defend its energy sector and Italy saying that the French model would fail.

Enel, Italy’s largest utility group, said last week that it could bid for Suez, prompting a merger of the French target with Gaz de France, the state-owned gas group.

Dominique de Villepin, the French prime minister, has given his backing to the merger, adding that his Government would control the enlarged group’s key decisions.

M de Villepin’s comments came as he announced plans to consolidate the capital of French companies to protect them against hostile operations.

Giulio Tremonti, the Italian Economy Minister, who met Charlie McCreevy, the European Internal Market Commissioner, called for action. “If the Commission does not act, my advice would be for it to close down because of a failure to meet its mandate,” he said.

Mario Draghi, Governor of the Bank of Italy, lambasted France’s protectionist model as “doomed to fail”.

The Commission has indicated that it would step in only if the planned merger between Gaz de France and Suez broke competition rules.

Enel has yet to declare whether it will proceed with a planned bid. Alessandro Luciano, a director of the company, said that it could be possible for the Italian group to take a stake in the merged French company.

This week the European Commission threatened legal action against France over a new decree by the French Government to protect 11 “strategic” sectors from foreign predators. The sectors include energy, biotechnology, casinos, aviation, defence and data security. Mr McCreevy said that he had written to the French Government demanding an explanation for the move.

Separately, it emerged last night that managers at Arcelor, the European steel maker, would be prepared to talk to Mittal Steel, its predatory rival. Arcelor had previously indicated that the company would not discuss Mittal’s approach.