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A few car transporters come and go through the gates at the Peugeot Citroen plant at Poissy on the outskirts of Paris. Last year 6,000 workers made the bodies of more than 1,000 cars a day.

As I stand outside there is not a soul in sight. The car park is filled with unsold cars. As production has been cut in half management and unions have come to a deal. The temporary workers have gone, but those who remain are on full salary and they have only worked four weeks so far this year. Production will start up again on Monday.

It is plants like this one that President Sarkozy is so determined to keep open, even if he's accused of the twin sins of protectionism and flying in the face of the single market. Ahead of Sunday's summit Gordon Brown, EU Commission President Barroso and the Czech prime minister have all exchanged public letters attacking protectionism.

But the French president is in no mood to climb down. Visiting a plant near Lyon he said:
"I was elected to restore the work situation and to make sure we keep production lines in France. Never mind the controversies and those who complain because, using taxpayers' money, I want to keep industrial jobs on French soil. It is my duty.
I will finish by saying this: when we introduced the auto fund, everyone criticised us. Today everyone imitates us. We're told we shouldn't have done it. What are the Germans now doing with Opel? What are the Swedes going to do with Saab? Frankly, my dear compatriots, in times of crisis you need to take the right decisions, and swiftly."

I am joined outside the gates by Jean-Francois Kondratiuk from the union Force Ouvriere, who defends his president. "It's absolutely natural that if the state lends money to manufacturers the production should stay in France."

Protectionism used to mean putting taxes on goods from outside your own country to protect industries at home. Now the arguments are more about aid to industry. Free trade versus protectionism broke the Conservative Party and the argument raged all over the world during the last century. But for a generation protectionist measures have been seen as vestiges of an out-of-date system that must be cleansed. Protectionists seemed as out of touch as flat earthers.

Nearly all economists argue that free trade enriches everybody involved and protectionism leads to tit-for-tat attacks which damage everyone. But the economist Xavier Timbaud from has a very French objection: "What President Sarkozy is doing is about saving his country at the expense of others. And that is not acceptable, because we have signed an agreement in the European Union and we have a principle of universalism which says that we are not the kind of people who try to save themselves at the expense of others."

I'll be reporting on the debate on tonight's PM programme on Radio 4 and News at Ten on ³ÉÈË¿ìÊÖ1.

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Why have one new institution when you can have three? Or indeed four. The De Larosiere report has backed off creating a single brand new watchdog to oversee financial institutions in the European Union.

The grand old man of European finance said that "we might have been accused of being unrealistic". He said his aim was not to pile rule upon rule, but to come up with a new system that was "ambitious but not unrealistic." Given the gloom I wrote about earlier it is quite appropriate that his system resembles , the guardian of the gates of Hades, a three-headed watchdog.

There would be separate new authorities to look after insurance, banking and securities. He also said it was clear that, although there were warnings before the crisis, the alarm bells were not ringing loud enough. So he also proposes another new body, called the "European Systemic Council", made up of the governors of the various national banks. He stressed the governor of the Bank of England would play a very important role.

The European Commission President, Jose Manuel Barroso, said they would make their official response a week today, but gave the report a very warm welcome, saying: "We are determined not to miss the chance to restore confidence in European and global financial systems. The citizens of Europe expect us to change the rules of the game."

Not everyone agrees: listen to the reaction on Radio 4's World at One. The chap at the end of the item may not be reassured that the president of the Socialists in the European Parliament has welcomed the report. PES president Poul Nyrup Rasmussen said: "The De Larosiere group's proposals represent an essential step forward. They are ambitious but practical. The spotlight is now on the European Commission. It is a test of Barroso's courage and conviction. Today should be an important day in the history of international financial markets - but we shall see if the current conservative European Commission is capable of taking the recommended steps." What do you think?

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The day in Brussels started bright, sunny and warm. I woke to birdsong for the first time this year. But the first day of spring is not warmed by any rays of economic sunshine.

One senior diplomat gloomily told me he could scarcely believe people were still walking around carrying on with their normal lives when the prospects looked so bleak, and none of the levers so energetically pulled by world leaders seemed to be working. I am not quite sure what he thought they should be doing instead.

Industry Commissioner Guenter Verheugen, a German, spoke of the "dark cloud" hanging over Europe. In the car industry alone he said 400,000 jobs were at stake. But the commission is warning the way forward is not to throw out the single market or free trade.

He said they would do all in their power to fight protectionism or what he called "pernicious economic nationalism".

The commission is poring over plans by six countries (Britain, Germany, France, Italy, Spain and Sweden) to help their car industries, to see if they do break the rules. There is a suggestion that the French may do a U-turn on their plan to link their billions of euros' worth of aid to keeping plants open in France. But the competition commissioner Neelie Kroes said "there should be a solution by the end of the day: but it takes two to tango". I'll be watching to see if Mr Sarkozy's dance card is full.

It is one of the trials of reporting the EU that the commission likes to announce various different proposals all on the same day. So more on the suggested EU financial watchdog this afternoon.

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"City may be ruled by Brussels" reads one headline in advance of today's report into regulation of Europe's financial institutions.

It is enough to make the UK government blanch, but the devil will be in the detail of the report by the former IMF director and head of the French Central Bank, .

As I write, so are the wise men of the committee. This up-to-the wire performance means diplomats and members of the Commission aren't exactly sure what will be in it. But many do expect it to suggest an overarching EU-wide watchdog, a new institution to act as an early warning system. It could be modelled on, or even under the authority of, the European Central Bank.

Fans of the proposal think that national watchdogs like Britain's Financial Services Authority no longer make sense: so many banks operate across too many borders with countries' banking sectors often having bigger assets than their nation's GDP.

Few think the current system works well, but opponents think the solution should be at a global rather than European level. Gordon Brown has recently dropped his opposition to tighter regulation, but we will have to wait and see what he's prepared to swallow.

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It is safe to say that the European economy won't be roaring out of recession as a result of an injection of new money from the European Union.

The trouble is that for four months there's been a row about money that doesn't exist for projects that aren't decided.

When the European Commission back last year it was really about trying to coordinate the stimulus packages of member states by urging they spend 200bn euros (£177bn) on tax cuts and investment. A relatively titchy 5bn was to come from the EU's own budget (OK, European taxpayers' money): money that hadn't been spent in 2008. Instead of giving the underspend back to the 27 member countries the commission wanted to fund green technology and broadband connections, as one way of stimulating Europe's economy.

But many states, including Britain, thought the list was too vague and that the money wouldn't be spent soon enough to do any good.

By the time the commission had come up with a new plan the lawyers ruled that they couldn't spend the 2008 money.

Now they think that they can find the cash from this year's budget, butsome countries were arguing that they don't get enough out of it.

There is the glimmer of a possibility that the row will be sorted out when the foreign ministers meet next month and commission sources say they are hopeful, but potentially wired-up, job-creating, carbon-hating wind farmers and wave-machine inventors and the like shouldn't hold their breath.

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Sarkozy continues to stick his neck out. At Sunday's Berlin summit, he accused the European Commission of not doing enough to help Europe's car industry.

Commission President Barroso retorted that they had done plenty, but that old-fashioned state subsidies to industry weren't allowed and weren't going to happen.

The scene is set for another confrontation in a week's time at the emergency EU summit on 1 March, which will talk about protectionism as well as what to do about those poisonous donkeys - you know, the "toxic asses" one hears so much about.

Before the meeting, the commission is expected to come up with a list of rules setting out what is and isn't allowed under their rules restricting national governments giving industry money.

The financial vortex is spinning that bit faster - last week saw the , which came as no surprise to me; Austria being ; , even if they were 4,000 miles from Paris; and not a single blog from me.

Apologies, but I was coping with a vortex of my own, pretending to be a single parent during half term.

I recommend computer-generated butterfly finger painting at Belgium's science centre, , for calm at the centre of the storm whether generated by bankers or kids.

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Do you know what the EU acronym that sounds like the croak of a cartoon frog really means? Just croak "Gerk" if you do.

Does the EU shroud itself in obscure language on purpose or does any work of detail produce its own arcane language?

Of course it is not just the lingo: the EU does seem difficult for people to understand. What's at the heart of the problem? Hear my answer on Radio 4 this Sunday 22 February at 10.45pm (2245 GMT) at the end of the Westminster Hour. It will be repeated on Wednesday 25 February at 8.45pm on Radio 4.

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Emergency summits are all the rage!

The Czechs have named the date for their on protectionism: it will be on Sunday 1 March. But they're also calling one in Prague in May to examine jobs and unemployment.

The Commission has already loosened rules so that more workers can get money from a fund set up to help if companies move outside Europe.

On the day that French carmaker Peugeot Citroen announces the loss of 11,000 jobs worldwide President Sarkozy's offer of 6bn euros in return for no closures in France must look very tempting.

But, at a news conference with the Czech president, Commission President Barroso made it clear that they would be "scrutinising" the French plan to make sure it worked "with the grain" of EU rules and "maintained the integrity of the single market". He said he was launching an appeal for all EU leaders to show their European spirit and do battle against economic nationalism.

But they were also trying to cool the debate. Czech Prime Minister Mirek Topolanek, invited to give his opinions on Mr Sarkozy's plan, seemed to regret his outburst earlier in the week. He said that he would not "continue this media thing" and noted that his job was to give leadership and direction to the debate and that perhaps he should have spoken directly to Mr Sarkozy. "Some things are very damaging for both of us."

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President Nicolas Sarkozy, acting as president of the European Union in the last six months of 2008, seemed to adore snapping his fingers and calling emergency meetings of the EU's 26 other presidents and prime ministers. At the time one French commentator told me it was part of Mr Sarkozy's style: the ability to conjure headlines out of planned meetings that in the end didn't achieve, or even conclude, very much at all.

Perhaps it is fitting that the Czechs, now in the chair, for the end of this month especially for other countries to dump on Mr Sarkozy. One insider said "essentially it's to tell Sarkozy to shut up". That wouldn't be a bad headline.

The EU is mustard keen on free trade inside and outside its borders, but now there are fears that protectionism will make a comeback. First there was the row with the United States over the mooted "Buy American" campaign. But the threat within comes from Mr Sarkozy, who appears to be attacking the very idea of a European common market, which is at the heart of the EU's philosophy...

First he announced on French TV that Peugeot, a French company, should think about coming home rather than having a big factory in the Czech Republic.

Then there's his loan of 6bn euros to the French car industry. It would appear to drive a coach and horses through EU rules against state aid on its own. But there are strings attached. It is based on the car companies' pledge not to close French plants. If there are cutbacks and French workers don't lose their jobs who will have to make the sacrifice?

Other big car-making countries like Slovakia, Germany and Sweden are worried that the French bail-out will support French industry and French workers at the expense of their products. The Czech prime minister pointedly said "reverting to nationalism is a short-sighted and irresponsible choice". He's apparently irritated, not only by the economics of all this, but at French sniping from the sidelines about the quality of his presidency.

So the summit could be uncomfortable for Mr Sarkozy. The same insider who thought Mr Sarkozy would be told to shut up wondered if he thought Europe's biggest Toyota plant, based in France, should take its business back to Japan. If he makes a fuss it could be even more uncomfortable for the EU as a whole. But is he wrong? Should countries protect their own workers and industries first? Although the ³ÉÈË¿ìÊÖ's Today programme, I think on Saturday, sportingly set up a debate on protectionism it ended up with one academic gamely defending protectionism in early stages of industrialisation. Anyone want to make a full-blown defence in the here and now?

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Latvia's veteran Prime Minister Ivars Godmanis scraped home by eleven votes, surviving a vote of no confidence that would have forced the resignation of his government.

He'd told MPs that getting rid of him and his coalition wouldn't solve Latvia's economic problems.

Those problems are grave: the crisis that affects us all has hit Latvia hard. I've put some statistics, courtesy of ³ÉÈË¿ìÊÖ Research, at the end of this post.

After , the policemen outside parliament were taking no chances. A line of them spread across the street and stopped people walking past the parliament building where the no-confidence debate was raging.

On the steps of the parliament, military policemen in camouflage fatigues and tan quilted jackets stood ready for any trouble. But the crowd which gathered seemed more curious than committed.

One man had a large Latvian flag; another held a very makeshift cardboard sign with the word "Resign!" scrawled on it in marker pen. The bare trees outside the building had little Latvian flags on them and people ironically laid at their base gifts for the MPs, including an axe and a spade. "Chop yourself down and bury yourself," was, I imagined, the intended message, although no-one could explain it to me.

But the group of 50 or so people faded away as the debate inside the building carried on. As someone who worked in Westminster for years, it was a joy to be able to wander around the chamber, on the same level as MPs, taking photos and recording sound effects.

I listened to one MP - Atis Kampars from the main opposition party New Era - say that yesterday the farmers had blocked the city and forced the resignation of the agricultural minister, who he portrayed as rather hapless and almost unaware of his own fate.

He said that yesterday it was tractors, but if the government didn't resign soon, it would be lorries or buses in a month or two and the whole lot of them would be forced out.

Later, I caught up with him and asked him what difference it would make if the government did resign.

"I respect how hard the prime minister works, but our main problem in Latvia is the people's catastrophic lack of trust in government. If the government resigns, at least there's a hope we could establish a wide, strong coalition which can make the tough decisions we need."

But, I said, everyone I had met, from farmers to business leaders, had just as low opinion of the opposition as of the government.

"Of course we know that. We need to change our constitution so we can hold new elections before the full term is over. So we need this wide coalition led by someone outside politics who's loyal and faithful and could win the people's trust back. That's why we are not putting up our own candidate for prime minister: we know we are not popular and we need someone professional, technical to take the job."

A difficult moment has been reached when politicians admit that the whole bunch of them is despised and they start talking of neutral experts to lead a Government of National Unity.

The problem is that the trust has evaporated and it is hard to see how any government can avoid the deeply painful measures that are being demanded by the International Monetary Fund in return for its loan. These are hard times for many Lativans, but they will probably get much harder.

After the vote I checked outside parliament to see whether crowds were gathering afresh. Only a couple of policemen stood ready, and the passersby just glanced at the building.

Earlier, one of the small band of demonstrators - who told me that he'd been at last month's protest-turned-riot - predicted that nothing would happen that night. "It's too cold. Minus six. They will wait until it gets warmer."

Latvia's political class needs to somehow regain people's confidence before then - but I can't for the life of me think what they can do.

§

Here are those statistics mentioned above.

 • Unemployment rose to 8.3% in October 2008; 9.2% in November and 10.4% in December (this is the highest rate in the EU27 after Spain, source Eurostat). 10.4% is also the estimate given by the EC for 2009, while 2010 could see the figure rising up to 11.4%.

 • The Latvian State Employment Agency said that in one month, the number of unemployed people has increased by 9,370 (from 67,065 registered unemployed at the beginning of December to 76,435 at the end. This is in a total population 2.27m.

 • The agency explains that workers of different levels of qualification are losing their jobs: auxiliary workers and cleaners as well as specialists with higher education are being fired. Dismissals are taking place in all sectors of production. The number of employers' registered vacancies also continues to decrease.

 • Average gross monthly wages and salaries (third semester 2008): 486 Lats (approx. 691 euros).

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The "British jobs for British workers" dispute seemed on the brink of a solution, although

What is interesting to me is not that the compromise plan proposes half the jobs going to British workers, but that the Italian company has accepted that all its workers on this job will get the standard terms and conditions as negotiated in the past by British unions. The company says they were anyway, but few of the protesters believe them.

European case law suggests that the company could be allowed to pay the Italians below the going rate. The European Court of Justice established that precedent in the Laval judgment.

The Latvian construction company, Laval, had been hired to build a school in Sweden. The EU rules say that companies must obey the minimum standards of the host country, such as maximum working hours and the minimum wage. Sweden has no minimum wage, and all such standards are set by agreements between unions and employers. Laval was expected to sign up to these conditions but refused. After a strike and many twists and turns the ECJ ruled the unions were in the wrong. Ever since then the European trade union movement has been asking for the rules to be rewritten, so that foreign companies are made to respect union agreements in host countries, or in that unlovely phrase "an end to social dumping".

As the Italian company is insisting its workers get the British union rate we have to ask why they are doing the job. Sometimes it's because native workers simply won't do the work, or in times of high employment aren't to be found. That's clearly not the case here. It could be because they are better, faster or cheaper. Most people automatically assume it is that it's about money. If the outlines of today's rejected deal become standard practice it could eradicate the main motive for shipping in workers from other parts of the EU.

But it will also increase the appetite for a new look at the existing laws. The Socialists in the European Parliament say: "We must maintain the internal market and the freedom of movement of capital and labour - the principles that have given unparalleled prosperity and are key to our countries' recovery from the financial downturn.

"The recent European Court judgments make it necessary that we have clarity on the current legal situation and within this context there is a need to review the Posted Workers' Directive, in order to avoid social dumping.

We urge the European Commission to be proactive in the midst of this economic downturn, particularly in relation to its effects on workers and their families."

Will the British government push for this, as it has hinted? I would be extremely surprised. Despite the noises from Downing Street diplomats haven't been asked to build any alliances or work up any proposals. And it will not escape the notice of other EU countries that it is always the British government that is in the forefront of the fight-back if anyone dares propose extending workers' rights.

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RIGA, Latvia

Since dawn the tractors have been circling their prey. Like some heavy prehistoric beasts, tractors with their scoops raised surround the ministry of agriculture. The farmers are angry and are demanding the resignation of the minister and higher prices for milk.

They are not alone in either their anger or the demand for more money and for political heads to roll. Just about every interest group blames the government for making the economic crisis worse. There is a vote of confidence in parliament tomorrow and it's touch and go if they can survive.

The head of the Latvian Employers' Federation, Elina Egle, has suggested there should be a business strike if things don't improve: factories should close their gates and bosses should withhold taxes. She tells me the government won't talk and won't listen and the business community has lost faith in them. But she doesn't have much time for the opposition either, saying that they haven't thought through their plans. If I may mix my ornithological metaphors, just about everyone thinks the politicians stuck their heads in the sand for too long before pulling them out and running around like headless chickens.

Ms Egle thinks Latvia should have joined the euro in the good times, and should use it now unilaterally. As we leave her office she and our fixer exchange what has become a common Latvian salutation "Be strong!" There is no faith that politicans will be strong for them.

Half the population lives in the capital Riga, where the up-market shopping centres are testimony to the boom years. After Latvia joined the European Union many people took out huge loans to pay for new cars, to do up their houses and buy the luxury goods they had been denied. Scandinavian banks were vying with each other for business, eager to give the biggest and cheapest loans. All the time the government was building up a huge debt. As Latvians travelled to Ireland, Britain and Scandinavia to find work, wages went up to attract them back.

Those good years took Latvia to a great height, and now it has crashed to the ground with a sickening thud. Surveys suggest that it is suffering more than any other European economy. The IMF has given huge loans and the government is trying to make massive cuts to balance the books. Wages of civil servants are to be cut by a third, some schools and hospitals are closing, VAT has been put up to 21% and more cutbacks are certain. This in part led to the . Some see it as a very worrying moment. Latvia is used to changes of government and lively street protests, but free Latvia is not used to political violence.

Ivars Laizans was there before the demo turned nasty. He's a 36-year-old policeman but he wasn't one of the cops in full riot gear. He was there as a steward on the march, part of the protest. It's an understatement to say he's fed up. I met him in the apartment on the edge of Riga that he shares with his wife and two children. He tells me at least he's lucky that he inherited the flat from his mum, so he avoided taking out a massive loan.

He sits at the kitchen table and helps his four-year-old daughter Laima with a painting. Even she is a victim of the crisis. The police no longer get the perk of a free nursery place. He says his colleagues just don't know what will happen next.

"I used to get my salary and know where I was. Then they cut my bonus, then they cut the perks, and now they're cutting the salary itself. All the time the cost of living is going up Free kindergarten has gone, free medicines have gone. Everything costs money these days.. I don't know whether I will have a job in the future: people come to work not knowing if they will be fired the next day. The government doesn't even seem to think they need the police anymore."

He thinks the government has to resign. "There's never any discussion about what they are going to do. They just go ahead and do it. No one believes them any more. They say one thing one day, and then do something else the day after. It's not just me saying this. It's what the whole country thinks."

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• - What's this?

For its proponents, one of the greatest benefits for ordinary people of European Union membership is their right to move and work across borders. .

. But what exactly is it they want?

Perhaps it is just another facet of the rising tension all over Europe, with .

What would the strikers in Lincolnshire make of this? I am not quite sure what it is they are demanding when they say "British jobs for British workers".

Perhaps they back the UKIP line that if Britain were outside the European Union, it could simply make its own rules. But they are not quite clear whether foreign workers would be banned or given work permits in some cases, or something else.

Somebody I bumped into over the weekend suggested that the problem was the lack of a European minimum wage. I don't quite see that, but it's true that the dispute highlights a tension at the heart of the EU.

The fans of an economically liberal Europe-wide free single market might argue that what the workers in Lincolnshire fear is good for the economy as a whole. If Italian workers can do the job cheaper, then so be it. If Romanian workers undercut the Italians, then, they might say, even better. It's also precisely why many on the left in Europe are suspicious of an EU that doesn't put protections of workers' conditions above everything else.

But it is even more fundamental than that. It highlights the obvious lack of a European identity, or what the left would call "European solidarity".

I am not sure how far the strikers would take this. On the News at Ten on Friday, one of the voices raised in support of the striking workers was from Glasgow. What would the Lincolnshire workers have said if a Scottish firm, employing mainly Scottish workers, had been doing the job?

Would they have said "fair enough"?

Would they have said "the UK is a unitary nation state; we have no problem with people from other parts of Britain coming here to work; what worries us is people from the rest of the EU; we may be in a single market, but we see them as foreigners, not as fellow Europeans"?

Or would they have said "local jobs for local workers"?

And is it any different in other EU countries?

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