Czech Prime Minister Mirek Topolanek, whose country currently holds the rotating EU presidency, told the European Parliament that President Barack Obama's massive stimulus package and banking bailout "will undermine the liquidity of the global financial market."

A day after his government collapsed because of a parliamentary vote of no-confidence, Topolanek took the EU presidency on a collision course with Washington over how to deal with the global economic recession.

The blunt comments pushed other European politicians into damage control mode, with some reproaching the Czech leader for his language and others reaffirming their good diplomatic ties with the U.S.

Most European leaders say the focus should be on tighter financial regulation, while the U.S. is pushing for larger economic stimulus plans — but nobody has so far escalated the rhetoric to such strident levels.

Topolanek's words are the strongest criticism so far from a European leader as the 27-nation bloc bristles from recent U.S. criticism that it is not spending enough to stimulate demand.

They also pave the way for a stormy summit next week in London between leaders of the Group of 20 industrialized countries.

The host of the summit, British Prime Minister Gordon Brown, praised Obama on Tuesday for his willingness to work with Europe on reforming the global economy in the run-up to the G-20 summit.

The United States plans to spend heavily to try and lift its economy out of recession with a $787 billion economic stimulus plan of tax rebates, health and welfare benefits, as well as extra energy and infrastructure spending.

To encourage banks to lend again, the government will also pump $1 trillion into the financial system by buying up treasury bonds and mortgage securities in an effort to clear some of the "toxic assets" — devalued and untradeable assets — from banks' balance sheets.

Topolanek, who will remain EU president until a new Czech government is established, bluntly said that "the United States did not take the right path.".

He slammed the U.S.' widening budget deficit and protectionist trade measures — such as the "Buy America" policies included in the stimulus bill, although Obama has said he opposes protectionism in principle.

Topolanek said that "all of these steps, these combinations and permanency is the road to hell."

"We need to read the history books and the lessons of history and the biggest success of the (EU) is the refusal to go this way," he said.

"Americans will need liquidity to finance all their measures and they will balance this with the sale of their bonds but this will undermine the liquidity of the global financial market," said Topolanek.

Since the EU presidency is expected to always to take the sensitivities of the member nations into account, the statement was daring and alarmed other European leaders, who moved quickly to mend fences with Washington.

Martin Schulz, leader of the Socialist group in the European parliament, said it was "not the level on which the EU ought to be operating with the United States."

"You have not understood what the task of the EU presidency is," he told Topolanek in the debate.

European Commission President Jose Manuel Barroso also weighed in with a tribute to trans-Atlantic cooperation.

"I really believe it is not a helpful debate, as I see sometimes, to try to suggest that Americans and Europeans are coming with very different approaches to the crisis," he told legislators. "On the contrary, what we are seeing is increased convergence."

Although German Chancellor Angela Merkel has warned against a spending race and said that ever bigger bailouts would create too much of a budgetary risk, French President Nicolas Sarkozy said Tuesday he is prepared to support the economy with a new spending package that may go down well in Washington.

Obama insisted Tuesday that his massive budget proposal is moving the nation down the right path and will help the ailing economy grow again. "This budget is inseparable from this recovery," he said, "because it is what lays the foundation for a secure and lasting prosperity."

Obama also claimed early progress in his aggressive campaign to lead the United States out of its worst economic crisis in 70 years and declared that despite obstacles ahead, the U.S. is "moving in the right direction."