France has been defending itself over the plan to lend almost EUR9bn to struggling domestic carmakers.

Though president Nicolas Sarkozy wants to lend PSA Peugeot Citroen and Renault EUR3bn (US$3.9bn) each on top of other measures, in exchange for a promise not to shut French plants or cut French jobs, the European Commission, which has yet to approve,  warned on Tuesday the plan might break EU laws against protectionism, amid sniping from the rival Czech Republic, Slovakia and German auto industries, Agence France-Presse (AFP) said.

France came out fighting on Wednesday, however.

"It's not protectionism, it's the defence of our industry and the defence of our jobs," minister for European affairs Bruno Le Maire told France Info radio, insisting there was nothing illegal about the plan.

"No, it's not protectionism," he insisted. "Protectionism is when you take tax or [take] regulatory measures to prevent countries with which you trade from selling their products in France."

Le Maire was quoted as saying the plan did not break the rules of the EU internal market and added that "if the market had worked as well as it should then it would have provided the liquidity that Peugeot and Renault needed."

AFP noted that automaking directly or indirectly employs one of 10 French workers in a sector hit hard by the global economic crisis and the collapse of consumer credit.

PSA said today it would axe up to 11,000 workers worldwide after announcing a EUR343m loss for 2008. But is has promised the French government not to axe French jobs and has hinted it would start outside France first.

The Czech Republic and Slovakia, which have French-owned car factories, have attacked France for being protectionist. The German industrial federation BDI has also said it is "highly alarmed".

Sarkozy has so far proposed EUR6bn in five-year loans, EUR2bn more for Renault and Peugeot's financial arms, EUR600m for suppliers and around EUR220m in grants for motorists who replace older cars.

Germany, it should be noted, is currently offering new car buyers EUR2,500 each to replace vehicles nine years or older and VW is asking the government to extend the incentive beyond the end of 2009.

France has insisted its measures do not amount to protectionism or a distortion of the EU single market, but Sarkozy has made it clear that he wants French firms to stop sending jobs and plants abroad, AFP noted.

"We want to stop factories from relocating abroad, and if possible bring them back home," Sarkozy said last week.

"If we give money to the auto industry to restructure itself, it's not so we can hear about a new plant moving to the Czech Republic or wherever."

France's plan can only go ahead if the European Commission approves it, and its spokesman on competition issues has already expressed concerns, the report added.

"Given what we have seen in the press, we have certain concerns," Jonathan Todd told AFP in Brussels on Tuesday. "The commission is going to look very closely at the French plan.

"If there is an additional condition like keeping a production plant in France, that would make the aid illegal," he warned.

Even in France, the bail-out has not been universally welcomed, the news agency said.

An editorial in the influential daily Le Monde cited Sarkozy's plan as an example of "the dangerous turn that Europe is taking towards falling back into national isolation, with everyone for themselves."