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2009-03-02 05:51:36
By CONSTANT BRAND, Associated Press Writer Constant Brand, Associated Press
Writer Sun Mar 1
BRUSSELS German Chancellor Angela Merkel and other EU leaders flatly rejected
a new multibillion euro (dollar) bailout for eastern Europe on Sunday,
suggesting that additional aid be given to struggling nations only on a
case-by-case basis.
Germany and the Netherlands also shot down suggestions that eastern European
countries that have seen their currencies plummet be given a quick entry to the
euro, which has remained strong against the U.S. dollar and Japanese yen. But
French President Nicolas Sarkozy said the EU could look at reviewing the
stringent euro currency membership criteria and two-year waiting period once
the global economic crisis ends.
Germany, the region's largest economy, has been under rising pressure to take
the lead in rescuing eastern EU members staggering from sinking currencies,
shrinking demand for exports and rising debt, but Chancellor Angela Merkel
insisted a one-size-fits-all bailout was unwise.
"Saying that the situation is the same for all central and eastern European
states, I don't see that," said Merkel, adding "you cannot compare" the dire
situation in Hungary with that of other countries.
That tough stance came even as Hungarian Prime Minister Ferenc Gyurcsany warned
that the global credit crunch was creating a widening economic chasm in the
27-nation bloc which threatened to rend Europe.
Noting that eastern members were being hit the hardest, he suggested setting up
an EU fund of up to euro190 billion ($241 billion) to help restore trust and
solvency in eastern members.
"We should not allow that a new Iron Curtain should be set up and divide
Europe," Gyurcsany told reporters.
Eight other EU nations had joined Hungary in vowing to pressure richer members
to back up vague pledges of support with action Poland, Slovakia, the Czech
Republic, Bulgaria, Romania and the three Baltic states. But Hungary's plan was
quickly shot down by Germany and others, who balked at the costs.
EU Commission President Jose Manuel Barroso said eastern European countries
already were getting billions in emergency rescue funds and loans from the EU,
the World Bank and other financial institutions and did not need a sweeping new
bailout plan.
He said the EU has euro25 billion ($32 billion) in reserve to help member
nations. It already gave euro9.6 billion of that to Hungary and Latvia, the
first EU government to fail because of the global economic turmoil.
Gyurcsany acknowledged that other EU leaders had questioned his plan but
insisted they would study it.
"If you are speaking about Europe and you are facing this type of complicated
challenge, you have to respond in a way not just concentrating on independent
nations, but some regions as well," he said.
Gyurcsany said eastern EU countries could need up to euro300 billion ($380
billion), or 30 percent of the region's gross domestic product this year.
He warned that failure to offer bigger bailouts "could lead to massive
contractions" in eastern economies and "large-scale defaults" that would affect
Europe as a whole because of political unrest and immigration pressures.
Czech Prime Minister Mirek Topolanek, who chaired Sunday's talks, promised that
the EU would not leave any nation "in the lurch."
Some EU nations notably Hungary, Poland and the Baltic countries of Estonia,
Latvia and Lithuania had urged the bloc to consider making it easier to join
the euro currency. The 16-nation currency has so far proved a stable financial
anchor in turbulent markets.
Polish Prime Minister Donald Tusk said his country did not support changes in
criteria for joining the euro, but said it favors shortening the time
prospective members are required to stay in an exchange rate mechanism, which
demands low and controlled inflation, healthy public finances and a budget
deficit below 3 percent of GDP.
Current rules set out a minimum two-year waiting period.
"This is not a Polish initiative, but we would welcome it," Tusk said.
Other EU states said existing economic requirements for joining the shared
currency should not be relaxed.
Dutch Premier Jan Peter Balkenende joined Merkel in rejecting a "softening" of
euro membership criteria that would allow weaker economies to join and possibly
damage the strength of the currency. Balkenende said if a nation wants to join
"it must meet the minimum economic criteria."
Sunday's summit was the first of three high-level talks EU leaders have planned
to forge a common strategy to combat the worsening recession. Yet vague
statements issued by the leaders hardly appeared a unified stance.
French and German leaders made separate calls for more EU funds to keep
European car makers alive and insisted those subsidies would not be
protectionist.
Merkel and Sarkozy called EU subsidy guidelines too stingy and said they needed
to be updated. Sarkozy welcomed EU regulators' approval of France's euro7
billion ($8.95 billion) in loans for Renault and Peugeot Citroen PSA, which
came only after France said it would not require the two to buy from French
suppliers or safeguard jobs at French plants.
The Czech Republic had protested earlier that French auto measures were
protectionist.
EU leaders also agreed on guidelines for how governments could buy up toxic
assets from banks to try to unfreeze lending. Banks are putting cash aside to
cover huge potential losses from complex investments that have tumbled in value
during the financial crisis.
But Eurochambres, a business association that represents 19 million companies
across the EU, criticized the leaders for failing to come up with concrete
plans Sunday to stimulate the economy.
"This summit was yet another rather unproductive political showpiece, bringing
no concrete solutions to the dramatic economic situation and showing a worrying
lack of economic coordination among member states," said Arnaldo Abruzzini,
head of Eurochambres.