ITALIAN leaders from across the political spectrum slammed moves by Paris to merge the utilities Suez and Gaz de France, calling it a naked attempt to exclude Italy's Enel from the French energy sector.

"This is 1914 all over again,'' said Italy's economy minister, Giulio Tremonti.

"Nobody wanted war, but war happened. Somebody launches an ultimatum, another responds, and the effect is a waterfall,'' he said. "We still have time to stop this race by the European states to build protective barriers.''

Silvio Berlusconi, Italy's outspoken premier, called for retaliatory action to avenge an act of economic hostility. "If they're going to protect their strategic sectors like that, we should do the same back to them,'' he was reported as telling colleagues. Rome is mulling plans to impose a 2pc cap on foreign ownership of energy companies.

The furore erupted as French leaders said they would rush through legal changes to allow the ?72bn ( pounds 49bn) merger, which would create Europe's biggest power utility. It comes days after Spain took steps to block a ?29bn bid by Germany's E.on for Madrid power company Endesa.

The moves have fuelled fears of a rising wave of protectionism across Europe, threatening to halt the boom in cross-border mergers and acquisitions.

Thierry Breton, the French finance minister, said a new law was needed to allow the French state holding in GdF to drop below 70pc. "It is too early to determine the final stake of the government in the new entity but it will in no case be lower than a blocking minority, or 34pc,'' he said. "It will be completely anchored in French national territory.''

The boards of both Suez and GdF were meeting last night to thrash out terms of the paper deal. Suez, though bigger, is likely to be the one acquired to shield the government from attacks by left-wing unions that it is giving up a state entity.

The pair have been eyeing a merger for years, citing synergies between GdF's gas network and Suez's needs as a gas consumer. Combined, the two believe they would have the clout to push further into the EU electricity market.

The idea of a merger had been stymied until now by the French state but this policy was dropped as soon as Enel put out feelers for Suez.

French premier Dominique de Villepin said the move was needed to secure French energy supplies. He said: "It will give France a second big player in the energy sector besides EDF and boost the global industrial vocation of our country.''

Fulvio Conti, Enel's chief executive, said the gambit amounted to renationalising Suez, a step backward for free-market reform in Europe. "It's as if the Italian government took over Fiat to defend it from a takeover bid by Renault. It's the funeral of the European market,'' he said.

One Suez shareholder, Knight Vinke Asset Management in New York, said the merger was "clearly a protectionist move'' even if it had some industrial logic.

"We fully support the view that Enel should be permitted to make an offer or a counter-offer for Suez without hindrance from political authorities,'' it said.

The Italian energy sector is still shielded by law, so angry protests over the Suez-GdF merger are pot calling kettle black. But France's increasing disregard of EU treaties is ominous. Spain and Poland are following suit; Italy plans to retaliate. Any UK group expanding in Europe is likely to be caught in the crossfire.