European Union finance ministers debated the pitfalls and merits of "economic patriotism" yesterday as disputes over mergers in the energy and banking sectors rumble on in Brussels.

Several ministers warned of the dangers posed to the EU single market by a rise in protectionism, while others defended the French, Spanish and Polish government's recent attempts to create national champions in strategic industrial sectors.

After an Ecofin meeting in Brussels, French finance minister Thierry Breton said that a balance had to be struck between competition, energy security and investment.

"We need these three elements and we need to juggle them at the same time," he said.

But Italian finance minister Giulio Tremonti, who held talks with Breton over the thorny issue of Enel's failed attempt to mount a takeover bid for the French firm Suez, warned of the dangers of economic nationalism spreading into the political arena.

"If the issue of ownership, of nationalism gets into electoral campaigns of EU countries, Europe will be paralysed," he said.

France and Italy are currently embroiled in a bitter dispute over the French government's intervention to arrange a merger between the French utilities Suez and Gaz de France.

Italy alleges that Paris only intervened after it learnt that the Italian energy giant Enel was preparing to bid for Suez. Italy will hold an election next month and France will hold a presidential election sometime next year.

French president Jacques Chirac also entered the debate on protectionism yesterday, following a separate meeting with the German chancellor Angela Merkel.

"I have heard here and there, notably in the foreign press, France being accused of being protectionist. I would simply like to underline the completely absurd nature of this judgment," Mr Chirac said.

"France is one of the most liberal countries in Europe from this point of view," said Mr Chirac, who noted that Paris attracted more foreign investment than either Germany or Italy.