The European Commission is satisfied that France's state loan plan for its carmakers will not amount to protectionism, the EU executive said on the eve of an EU summit focused on the economic crisis.

"I am satisfied with the guarantees set out by the French authorities on the absence of protectionist elements in the plan for aid to the automotive sector," EU Competition Commissioner Neelie Kroes said in a statement issued on Saturday.

France proposed a 6 billion euros ($7.61 billion) state loan for Renault and PSA Peugeot-Citroen in return for what has been characterised as an unwritten pledge not to close facilities in France during the loan period, which according to the original plan could go up to five years.

The Commission said French Industry Minister Luc Chatel had sent a letter on Saturday to Kroes spelling out that the aid plan would not contravene the principles of the internal market.

"In particular, the loan agreements with manufacturers would not contain any condition regarding either the location of their activities or a preference for France-based suppliers," the Commission said.

There was no immediate comment from the French president's office.

The Commission statement was markedly more guarded than most issued by the EU executive when it gives approval for aid plans.

It added it would closely monitor the implementation of the plan. The statement did not elaborate on how the Commission would treat any unwritten pledge by the carmakers not to relocate activities, nor on the loan period -- which had initially raised competition concerns because of its length.

Comments by President Nicolas Sarkozy suggesting that any French automakers should not move more production to cheaper locations, such as east European states, have triggered fears of a return to economic nationalism.

Some EU states, especially in the east, are concerned that political pressure will lead to a breach of EU state aid rules and so undermine the single market on which the bloc is based.

The Czech EU presidency wants EU leaders to recommit to EU internal market rules at a special summit on Sunday.

Kroes said in her statement on Saturday that Europe must be vigilant to avoid a return to protectionism and its negative consequences on employment.

Sarkozy is expected to raise the issue of support for Europe's auto industry at Sunday's EU summit. Leaders will aim to show voters and world markets they can bridge differences hampering action on the financial crisis.

Governments around the world are under pressure to help their carmakers, which have been hit by slowing economies, sharply falling demand and tight credit.

The EU executive, which monitors state aid in the 27-member bloc, has been scrutinising the French scheme and another car aid plan from Spain and is awaiting news from Italy on its auto package.

It is also holding talks with Britain, Sweden and Germany over their schemes.