Volkswagen CEO Martin Winterkorn has joined mounting criticism from EU partners labelling the French government's announcement of a 6 billion euro ($11.7 billion AUD) loan to domestic car manufacturers as protectionist.
The loan was granted to Renault and PSA/Peugeot-Citroen in return for a pledge not to close French sites.
"No one would be helped (from this decision)," Winterkorn said. "Not workers, companies or customers if the protectionism of France's agriculture policies is now transferred to the car sector. Europe has benefited tremendously thanks to the free trade of goods and services. Anything less than that would be a giant step backwards with fatal consequences."
German Finance Minister Peer Steinbrueck warned on Friday of a rising threat to free trade and said major powers needed to ensure they did not descend into the same destructive protectionist spiral seen in the 1930s.
As the world's top exporter of goods, Germany is particularly vulnerable to any rise in protectionism.