The Spanish government said yesterday it would widen the powers of the country's national energy commission (CNE) in what was seen as an attempt to block Eon's planned €29 billion takeover bid for Endesa, the electricity group.

María Teresa Fernández de la Vega, deputy prime minister, said the cabinet would use decree powers to broaden the CNE's jurisdiction to include foreign companies looking to join Spain's regulated gas and electricity markets.

Although the measure does not guarantee that the Eon bid, announced on Tuesday, would be blocked, it could give Madrid an excuse to step in.

José Montilla, industry minister, also hinted the government could invoke executive powers against the deal because of state involvement in Eon.

Although the state of Bavaria owns just 2.5 per cent of the company, he said Berlin's approval of the Eon takeover of Ruhrgas against antitrust recommendations could constitute state control.

His comments came despite earlier warnings from the European Commission about "unilateral action" against the Eon bid.

Brussels yesterday cautioned Madrid against using a controversial 1999 law to curb foreign investment in Spanish energy groups, pointing out that Brussels had repeatedly found the legislation broke European law. The regulator added it was preparing a legal challenge at the European Court of Justice to force Spain to scrap the law.

Brussels argued last year its provisions "constitute unjustified restrictions on the free movement of capital in violation of EU treaty rules".