Brussels - The head of the European Commission on Wednesday urged member states to work together to protect jobs and industry rather than be tempted by "populist" and "protectionist" measures.

"The global financial crisis is not an excuse for protectionism: trade barriers ship out prosperity and open the gates instead to short-term economic populism," said Jose Manuel Barroso.

In other words: "yes to proactivism, but no to protectionism," the commission chief said.

While Barroso's words were directed indiscriminately at all world governments, the underlying message was set to resonate strongly in those European capitals that are facing mounting requests for support from their national industries.

Earlier Wednesday, for instance, Europe's leading carmakers travelled to Brussels to ask for help in developing and selling more climate-friendly cars.

French President Nicolas Sarkozy, meanwhile, has suggested creating a "strategic investment fund" to stop foreign "predators" from snatching up French companies.

Barroso was addressing reporters in Brussels following the approval by the European Union executive of guidelines on how to mitigate the impact of the financial crisis on the European economy.

This follows a summit meeting in October, in which EU leaders called on the commission to propose ways of preserving "the international competitiveness of European industry."

The guidelines will lay the basis for an EU-wide, economic recovery plan, due to be unveiled on November 26.

"Our top priority is to minimize the impact on jobs, purchasing power and prosperity of our citizens," Barroso said.

Though no new EU money is foreseen, the commission says it can help member states deal with rising unemployment and poverty by reviewing its globalization adjustment fund and its European social fund.

Member states, meanwhile, should also go ahead with plans to make their industries greener and make their buildings more energy efficient.

And while conceding that the main instruments to stimulate demand and employment remain firmly in the hands of individual member states, Barroso stressed that governments should work together rather than fight their own corner and risk undermining Europe's single market.

"Europe must confront the economic downturn with the same robust, and coordinated approach we have taken on the financial crisis," Barroso said.

Asked about the dangers of a "subsidies race" unfolding within the EU, Barroso said: "It would be a mistake to think that the solution for the current crisis is a public subsidising of all the problems we have."

And wile EU rules do not explicitly forbid subsidies, these should be targeted, temporary and proportionate. Most importantly, they should not have negative "spill over" effects on the economies of other member states, Barroso said.

The EU's monetary affairs commissioner, Joaquin Almunia, for his part, warned those governments whose public finances are not in order against the temptation of spending their way out of the downturn.

"Policy errors should be punished," Almunia said, adding however that "the (Stability and Growth) pact is not only about punishment", it is also about "peer support in difficult situations."

His words came just hours after the commission had agreed to throw a 6.5-billion-euro (8.25-billion-dollar) lifeline to Hungary, whose currency and public finances are struggling to cope with the credit crunch.

Ireland and Greece are among those member states set to exceed the EU's budget deficit-to gross domestic product ratio of 3 per cent this year. (dpa)