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EU rejects Eastern Europe bailout, protectionism

Posted on: March 2, 2009


AFP – Monday, March 2

BRUSSELS (AFP) – – EU leaders ruled out on Sunday a regional bailout plan for eastern Europe despite a Hungarian warning of a “new iron curtain” while rejecting protectionism as a response to the economic crisis.

The European leaders promised to extend a helping hand to any EU country needing help but stopped short, at an emergency summit in Brussels, of agreeing on a region-wide package to help eastern Europe cope with the turmoil.

“I think that it was perfectly clear that the European Union isn’t going to leave anybody in the lurch,” Czech Prime Minister Mirek Topolanek told journalists after chairing the summit as holder of the bloc’s presidency.

The crisis has hit eastern and central European countries particularly hard because their economies are highly dependent on a steady stream of credit from Western sources that has all but dried up.

Hungarian Prime Minister Ferenc Gyurcsany called ahead of the summit for a show of solidarity with the region, recommending an international support fund worth up to 190 billion euros (240 billion dollars).

“We should not allow a new iron curtain to be set up and divide Europe in two parts,” warned Gyurcsany, who also proposed that the rules on adopting the euro should be relaxed.

However, EU leaders opted instead for a case-by-case approach to helping troubled countries in the region “on the basis of all available instruments,” according to a statement issued after the summit.

“This idea of dividing up into old member state countries, eurozone countries, non-eurozone countries, north against south, or east against west, that is clearly an approach we rejected,” Topolanek said.

European Commission President Jose Manuel Barroso said it was the eastern European countries that had said “they do not want a programme just for them.” as “there is a great diversity of situations.”

However several EU leaders on Sunday suggested it might be possible to fast-track membership of the eurozone, thereby giving some of the eastern and smaller nations access to the relative stability of the common currency.

Many eastern European countries are also increasingly concerned about the spectre of protectionism looming over Europe, especially after France made aid to its car sector conditional on companies not moving production to the region.

While the European Commission deemed the French auto package on Saturday to be free of protectionism , fears lingered that as the crisis worsens governments will resort to bailing out their industries at the expense of other countries.

“Always we must resist the temptation of protectionism,” Polish Prime Minister Donald Tusk told journalists after a pre-summit meeting of leaders from nine eastern European countries.

French President Nicolas Sarkozy rejected the accusations of protectionism.

“We never asked for factories (outside of France) to be shut in order to keep ours. We asked that our factories are not shut. It’s not the same thing,” he argued.

British Prime Minister Gordon Brown said that battling protectionism was not only a concern in Europe but should also be at the heart of global response to tackling the economic crisis.

He said he would put the idea of a “global grand bargain” to save the world economy to US President Barack Obama during a trip to Washington from Monday.

EU leaders also gave their backing to European Commission guidelines for dealing with toxic assets ravaging banks’ balance sheets, which would force them to come clean about how much they hold on their books.

Sarkozy said the agreement gives each EU country “great flexibility to determine the eligible assets” while at the same time gives a “European framework to ensure the good functioning of the interior (EU) market.”

The EU leaders will meet again on March 19 where they hope to seal a strong, unified line to take to a meeting of the G20 industrialised and emerging nations In London on April 2.

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