EUROPE’s leaders gather in Brussels tomorrow to consider ways to transform their Continent into an economic powerhouse. Yet even as they discuss free trade their countries are erecting barriers that threaten to tear the Union apart.

Many of the 25 are blocking takeovers and mergers, resisting the free movement of workers and imposing tariffs on cheap imports.

In a blunt warning to the leaders José Manuel Barroso, the President of the European Commission, said yesterday that the “absurd” economic nationalism sweeping European capitals had to stop.

Charlie McCreevy, the Internal Markets Commissioner, cautioned against building “useless political Maginot lines”, a reference to France’s ineffective defences in the Second World War.

The two-day summit begins tomorrow and Senhor Barroso and his commissioners have been making increasingly outspoken attacks on countries, such as France, that have been pandering to public fears about globalisation by trying to shut out competition from the Far East, from Eastern Europe and, most alarmingly, even from other Western European countries.

Diplomats fear that the clash between Anglo-Saxon free market economics and French-led protectionism is a battle for the future direction of Europe.

Lehman Brothers, the investment bank, gave a warning in a report that the very future of the single market might be at stake at the summit.

Senhor Barroso said yesterday: “We can’t build barriers against each other in the single market — that’s absurd. Our problems shouldn’t arise because of our problems with each other. We are a big supranational market of 450 million people. We can’t have 25 mini markets.”

EU governments have been trying to block a wave of mergers between national companies, halt the free movement of workers in the EU, curb the imports of cheap goods from the Far East and have jeopardised the world trade talks by refusing to curb EU farm subsidies.

Madrid is trying to block E.ON, the German energy group, taking over Endesa, its Spanish rival. Paris is trying to block Enel of Italy from acquiring the Suez energy concern by pre-emptively ordering the merger of Suez with state-owned Gaz de France.

Luxembourg has been trying to stop Mittal, the Anglo-Indian steel company, taking over Arcelor, a pan-European steel producer. Warsaw is blocking the Italian company UniCredit from taking over BPH, Poland’s third-largest bank. In addition, France has embarked on a policy of “economic patriotism”, declaring that 11 industrial sectors, including gambling, are “strategic”, meaning that any foreign shareholdings would have to be approved by the Government.

A coalition of Western European countries has succeeded in neutering the EU’s services directive, which aimed to make its easier for Eastern European professionals to work in Western Europe. Italy and other countries have bullied the Commission into introducing 20 per cent tariffs to curb cheap imports of Chinese and Vietnamese shoes.

Britain has largely avoided interference in foreign takeovers. Most British electricity and water companies are foreign-owned. The British Government has not been involved in present attempts by Ferrovial of Spain to take over BAA, the operator of airports including Heathrow and Gatwick.