Speaking before the European Parliament in Strasbourg on Wednesday, European Commission President Jose Manuel Barroso warned that member states that shielded companies only left them ill-prepared to compete in global markets.

"In a globalized world, no member state can go it alone. This is not the time for economic nationalism," he said.

A fierce debate is raging in Europe over the state's role in the economy after a series of high-profile corporate deals that fuelled concerns of a rising tide protectionism among EU countries.

"Defending national champions in the short-term usually ends up relegating them to the second division in the long-term," Barroso warned. "More efficient companies that have been subjected to the full rigor of competition leave national champions behind as they move into international markets," he added.

EU to fight firms that hinder competition

Concerns about protectionism have so far focused on Rome's claims that Paris engineered a merger between state-controlled Gaz de France (GDF) and utilities group Suez to thwart a rival bid for the latter from Italian energy group Enel. Although the GDF-Suez deal has grabbed the limelight, other recent deals have also stoked concerns about protectionism.

Madrid is currently studying ways to keep German energy giant E.ON from buying Spanish group Endesa despite warnings from the European Commission. Meanwhile, France, Luxembourg and Spain are looking at ways of keeping Mittal Steel from acquiring rival Arcelor, a deal they deeply oppose. The European Commission is also embroiled in a standoff with Warsaw over Polish efforts to keep Italian bank Unicredit from creating a big rival to the leading state-controlled bank.

Barroso warned that Brussels would not hesitate to use its powers to fight companies it perceived were preventing competition in Europe.

"Let there be no misunderstanding; the (European) Commission will intervene if companies abuse a dominant position on the market," he said. "We are legally bound to enforce competition rules and to protect consumers, and I will make no apologies for that," he added.

A central priority

The EU's top regulator, Competition Commissioner Neelie Kroes, also vowed to defend competition in Europe.

"As guardian of the (EU) treaty, and as the institution responsible for merger control on competition grounds at the European level, the (European) Commission is determined to guarantee that companies can effectively benefit from the advantages of the EU's internal market," she told Europe Parliament members.

"That is why enforcement of these provisions is, and will remain, one of the commission's central priorities," she added.