The move is being interpreted by many as a naked attempt by French politicians – led by prime minister Dominique de Villepin – to create a national energy champion and ward off an effort by the Italian group Enel to build a major presence in the French market.

Italian politicians have been quick to cry foul, with emotionally charged statements being hurled across the Alps from Rome accusing Paris of ‘neo- protectionism’.

Giulio Tremonti, Italy’s finance minister, told reporters that, the tendency of European states to build protective barriers must be stopped. We still have time. If not, we risk an August 1914 effect.

Enel is actively seeking expansion opportunities outside Italy, where competition rules mean that it is will struggle to build its market share any further. News of its apparent interest in buying either Suez or its Belgian arm Electrabel triggered a flurry of political activity in Paris that led to the ‘merger of equals’ being unveiled by Mr de Villepin.

French trade unions have reacted angrily to the deal however, arguing that it constituted a privatization by stealth. GdF was partly privatized last year, although the government retains majority control. Under the agreement with Suez, this would change, leaving Paris with a minority interest in tended to repel would-be foreign buyers.

A combined Suez-GdF group would be the world leader in liquefied natural gas, and rank as Europe’s second largest energy company by revenues, behind German heavyweight E.ON.

Sources in Italy say that should the deal go through, it will contact Brussels on the grounds that France is going against the spirit of market liberalization enshrined in the EU’s second electricity and gas directive.