EU Rejects Multi-Billion Dollar Rescue Plan For Eastern Europe
By Stefan J. Bos, Worthy News Bureau Chief reporting from Budapest
BUDAPEST, HUNGARY (Worthy News) — European Union leaders have ruled out a multi-billion dollar rescue plan for Eastern Europe in the face of the global economic crisis, despite warnings from Hungary that the rejection could lead to an economic “iron curtain” across the continent.
The announcement followed an emergency EU summit on Sunday, March 1, at which officials debated ways to tackle Europe’s biggest financial crisis in generations.
Ahead of the EU summit in Brussels, Hungary’s Prime Minister Ferenc Gyurcsany urged the European Union to show solidarity by establishing a support fund of about $240 billion to help failing economies in Eastern Europe. That was far more than the roughly $30 billion that international institutions agreed on Friday to make available.
Gyurcsany, whose country is among the hardest hit by the global economic crisis, said his plan could prevent the creation of a new “iron curtain” which, he warned, would “divide Europe” between rich and poor nations.
However, Chancellor Angela Merkel of Germany, Europe’s largest economy, made clear she strongly opposes a bailout plan for Eastern Europe.
VERY DIFFERENT
“The situation is very different in each EU country and aid should be handled on a case by case basis,” said Chancellor Merkel. “You cannot compare Slovenia or Slovakia with Hungary. We help countries in need. But I think a one size fits all bailout is unwise.”
Despite these frictions, EU leaders reached out to East European member states, saying they would not turn to protectionism to support ailing business sectors.
French President Nicolas Sarkozy recently raised concerns in Eastern Europe when he announced plans to lend French car makers billions of dollars on the condition that they not close French plants or move operations to “the Czech Republic or elsewhere” where manufacturing costs are lower.
But European Commission President Jose Manuel Barroso sought to allay fears of protectionism.
AUTOMOTIVE SECTOR
“In fact, we have discussed specific issues – namely the automotive sector and how it is possible to support the automobile sector by not breaking the rules of the internal market and not seeing national measures that could be detrimental to other countries,” Barroso said.
There were also calls during the summit to make it easier for East European countries to introduce Europe’s single currency, the euro.
But Czech Prime Minister Mirek Topolanek, whose country holds the rotating EU presidency, disagreed. “Concerning the rules for entering the eurozone, I think the majority of countries agree that it would be an error to change the rules of the game at this time,” he said.
Since the collapse of communism in Eastern Europe, former Soviet bloc countries have borrowed from western nations to finance their growing economies. But with the global credit crisis, it has become increasingly difficult for these developing economies to raise enough capital to pay their debts.
Sunday’s EU summit was the latest in a series of European meetings before the leaders of the “Group of 20” major industrialized nations meet in London next month. (This Worthy News story also airs on the Voice of America (VOA) network).