(BERLIN) - Chancellor Angela Merkel and the powerful German auto industry slammed a proposal by the European Commission Wednesday to impose heavy fines on car-makers that fail to meet emissions targets.

They argued that the measures would unfairly burden German auto manufacturers, a major component of Europe's biggest economy.

"This is industrial policy at Germany's expense," Merkel fumed after a meeting with leaders of major international lending institutions.

"It is senseless to impose a penalty that bears no relation to the actual cost of carbon dioxide emissions."

The German Automobile Manufacturers Federation (VDA) also demanded "major changes" to the proposals, arguing that they put a disproportionate burden on makers of bigger cars.

"With the current proposal... neither the cause of environmental protection nor economic reason is being served," VDA president Matthias Wissmann said. "European environmental policy must not be set at the expense of a few manufacturers."

A government spokesman said earlier that the emissions plan would backfire.

"It would hinder innovation in the automobile industry, threaten jobs and fail to be an effective instrument for climate protection," he said.

The penalties muted by the European Commission, the EU's executive arm, would start in 2012 at 20 euros (28.8 dollars) per gramme of carbon dioxide over a target and climb to 95 euros in 2015.

Each auto-maker selling cars in Europe would have specific targets assigned to it with the aim of cutting CO2 emissions to a European average of 130 grammes per kilometre travelled for new cars.

Parts and fuel-makers will be tasked with shaving a further 10 grammes off the average with improvements to gearboxes and air-conditioning systems, tyre-pressure monitoring and the use of more biofuels.

The combined efforts are aimed at cutting average emissions by a quarter, to 120 grammes per kilometre on average from about 160 currently.

Countries such as Germany and Sweden which make big petrol-guzzling cars have fiercely opposed the plans. Major supporters include France, Italy, Spain and Romania, whose auto industries make smaller more fuel-efficient cars.

Merkel, who championed climate protection during her presidencies of the Group of Eight industrialised nations this year and the EU in the first half, said Germany shared the 120-grammes per kilometre goal.

"But the way proposed to get there is not economical," she said.

The Commission proposal still has to be approved by the European Parliament and the EU's 27 member states before it can come into force.

Text and Picture Copyright 2007 AFP. All other Copyright 2007 EUbusiness Ltd. All rights reserved. This material is intended solely for personal use. Any other reproduction, publication or redistribution of this material without the written agreement of the copyright owner is strictly forbidden and any breach of copyright will be considered actionable.