German Chancellor Angela Merkel is defending her government's advocacy of creating "European champions" in business in the face of sharp criticism from the country's main industry lobby group.

In February, Economy Minister Peter Altmaier proposed an industry strategy that included "national and European champions" to compete against big international rivals, and also floated the possibility of the government temporarily taking stakes in technology firms to head off foreign takeovers.

Dieter Kempf, the head of the Federation of German Industries, told an annual conference Tuesday that "these supposed European champions would weaken European competition and run the risk of becoming inefficient."

Merkel delivered a robust defense: "How often have we said how proud we are of BASF being the biggest chemical company in the world?"