European Union leaders decline to bail-out eastern Europe.
EUROPEAN UNION leaders have rejected calls for a special €180 billion ($229 billion) rescue fund for ex-communist countries in east and central Europe. Leaders gathered in Brussels on Sunday March 1st for an emergency summit to discuss the economic crisis dismissed suggestions, led by Hungary, that a single plan was needed to save the region. Without massive help for ex-communist nations, Hungary’s prime minister, Ferenc Gyurcsany, had said, a “new Iron Curtain” risked splitting the continent anew.
But Angela Merkel, the German chancellor, squashed talk of a dedicated plan for eastern Europe, saying the ten ex-communist countries in the EU faced “very different” degrees of peril in this economic crisis. It was ill-advised to throw “massive figures” around, added Mrs Merkel. Hers is a voice that counts: Germany pays more into EU coffers than any other nation.
In Brussels, it was seen as highly significant when German ministers signalled last month that they might be prepared to step in to prevent a country defaulting within the 16-member group that shares the single currency. But a dedicated bail-out for the ten ex-communist countries that have joined the EU since 2004 is clearly a step too far. Germany will hold federal elections later this year, and voters there are acutely sensitive to suggestions that Germany and other rich nations should bail out weak or profligate members of the European club.
The German chancellor was one of several western leaders who also dismissed calls to ease the rules that govern membership of the single currency. Some eastern European governments would like to see the two-year probation period for prospective members cut short, to allow them to enjoy the sheltering embrace of the euro sooner. Mrs Merkel held out only the prospect of speeding up access to a preliminary stage of monetary union, in which countries peg their currencies to the euro.
Nobody doubts that several members of the former communist block are in desperate economic straits: Latvia and Hungary have already received billions of euros in EU stabilisation funds as part of bail-out plans organised by the International Monetary Fund. The fate of the newcomers is of acute interest to those western countries whose banks have invested heavily in the east, including Austria, Greece, Italy and Belgium. Further north, Scandinavian banks are heavily exposed in the Baltic republics.
There has been much rhetoric in the days running up to Sunday’s summit about the need to avoid splitting Europe along east-west lines, including from the meeting’s formal host, the Czech prime minister, Mirek Topolanek, whose country holds the current EU rotating presidency.
But in the end for very different reasons, a consensus formed among EU leaders that such talk is dangerous. For countries like Poland or the Czech Republic, whose economies are in relatively robust shape, there are strong arguments against allowing the impression to form that there is a single disaster area in the east of Europe, which worldwide investors enter at their peril.
Mr Topolanek invited fellow leaders to stress instead the importance of Europe’s single market, with its competition rules and founding principles of free movement of workers, goods, capital and services within the EU. Everyone at the summit understood the reference: eastern European governments were appalled when the French president, Nicolas Sarkozy, last month suggested that French carmakers should promise not to shift production out of France in exchange for €6 billion in cheap loans. In a television interview, Mr Sarkozy had added that it was “unjustified” for firms like Renault or Peugeot to make cars in places like the Czech Republic, for sale in France.
Mr Sarkozy originally wanted to call a summit of heads of government from the 16 nations that use the euro, but his idea was rejected by Mrs Merkel, in favour of a gathering of all 27 nations, chaired by the Czech Republic (which does not use the single currency).
Perhaps understandably, the French president was on prickly, defensive form, insisting he was opposed to protectionism, and saying France should in fact be “thanked” for making a million cars a year in overseas factories, many of them in eastern Europe. The French car plan has now been approved by European Commission regulators, who said they had been assured that French car firms were free to produce cars where they wished.
Others remained keen to make a point. Gordon Brown, the British prime minister, told the summit that protectionism was a “road to ruin”. It was not clear if his joke was intentional.
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