Czech PM: Euro Project Deformed By Crisis Response

The EU sets limits on members` budget deficits, and imposes rules on free internal trade and state aid to companies.

The way European countries have responded to the financial crisis has deformed the euro zone and the EU must avoid protectionist policies to avoid an even deeper crisis, Czech Prime Minister Mirek Topolanek said on Tuesday.

The Czechs, who hold the European Union presidency, have not adopted the euro currency but have been calling for adherence to the bloc's rules underpinning it amid the global economic crisis.

The EU sets limits on members' budget deficits, and imposes rules on free internal trade and state aid to companies.

"The response of the euro zone countries to the financial and economic crisis deformed the joint project of the euro more than any other imaginable event," Topolanek said in an online chat on the Czech EU presidency's Web site www.eu2009.cz.

"Most of the national states using the euro started breaking the common rules in their declarations as well as practical steps, while the basic anchor of the whole process is to adhere to these common rules."

Topolanek has sharply criticised French President Nicolas Sarkozy who called last week for French car companies to make cars in France rather than in countries like the Czech Republic.

Topolanek said in the chat that he saw Sarkozy's comments as a play to a domestic audience and that he hoped the row would be overcome at an extraordinary EU summit he plans to call in Brussels before the regular March gathering.

"If the result of our shootout is an agreement at the informal European Council...that we will not be using this type of media competition and that we will halt protectionism, then this shootout will have served its purpose," he said.

He said that big countries must avoid protectionist policies whose adoption would only lead to a repetition of the deep economic crisis in the 1930s.

The Czechs have pledged to adopt the euro at some point, but have dropped an earlier set 2010 target and have set no new date.