PARIS (Reuters) - France and Germany responded defiantly Wednesday to a U.S. decision to bar their firms from competing for prime contracts to rebuild Iraq (news - web sites), a move which could open a new rift in troubled transatlantic relations.

The United States unveiled plans Tuesday to limit competition for 26 reconstruction contracts in Iraq worth up to $18.6 billion, excluding countries such as Germany, France and Russia which opposed the war.

France said it would study whether the U.S. move was legal and Germany said it could not accept the U.S. decision.

"That would not be acceptable for the German government. And it wouldn't be in line with the spirit of looking to the future together and not into the past," a spokesman for German Chancellor Gerhard Schroeder said in Berlin.

He did not say what action Germany might take.

In an apparent effort not to sharpen the brewing diplomatic row with Washington, President Jacques Chirac, Foreign Minister Dominique de Villepin and other ministers avoided reporters' questions after a cabinet meeting...

...Israel also did not make the list, presumably as a sop to Arab rejectionism toward the Jewish state. If the EU-niks want to show that they're motivated by principle rather than greed, they ought to protest Israel's exclusion as well as their own.