European Union governments vowed on Sunday to conquer the financial crisis and recession gripping their economies by extending help to beleaguered eastern European states on a country-by-country basis and respecting the rules of the single European market.
The fragility of the financial systems in several eastern European countries dominated an emergency summit in Brussels, where leaders of the 27-nation bloc committed themselves to “getting the real economy back on track by making the maximum possible use of the single market, which is the engine for recovery”.
The summit was called to reaffirm core EU principles, such as avoidance of protectionism and solidarity among richer and less well-off member-states, in the face of a crisis that is putting the bloc’s unity under severe pressure.
While recognising the need to stop financial contagion spreading from east to west, the leaders rejected an appeal from Hungary for a €180bn aid programme to recapitalise the banking systems of central and eastern Europe and reschedule foreign currency debt.
“More, of course, will be done, but on a case by case basis, not on a category basis. In the new member-states there are different situations,” José Manuel Barroso, European Commission president, told reporters after the summit.
The Hungarian proposal ran into objections not just from Germany, the largest contributor to the EU budget, and other rich western European states, but from former communist countries such as the Czech Republic and Poland.
They contended that, in contrast to Hungary, which received an emergency $25bn aid package last year from the International Monetary Fund, the World Bank and the EU, their economies were fundamentally sound and did not need emergency help.
“When it comes to any specific plans for eastern Europe, we don’t need those plans,” said Mikolaj Dowgielewicz, Poland’s EU affairs minister.
Summit participants pointed out that the World Bank, the European Bank for Reconstruction and Development and the European Investment Bank had already announced a €24.5bn financial aid package last week for both EU and non-EU countries in eastern Europe.
“We help countries in need and we will do so further, particularly through international institutions,” Angela Merkel, Germany’s chancellor, told reporters.
“But I see a very different situation in different countries. We cannot compare Slovakia and Slovenia with Hungary,” she said, referring to two countries that are to some extent sheltered from the financial crisis by being members of the 16-nation eurozone.
Mr Barroso said the EU leaders had agreed that western European banks should help their eastern European subsidiaries by not starving them of a share in the multi-billion euro rescue funds that governments have given to the parent banks.
Banks in the eurozone have lent $1,250bn to eastern Europe, and Moody’s, the credit ratings agency, warned last month that it might downgrade certain western European banks because of their exposure.
“Support for parent banks should not imply any restrictions on subsidiaries in other EU countries,” Mr Barroso said.
There was a misperception that the EU had done too little for the 10 former countries that joined the bloc between 2004 and 2007, Mr Barroso said. The EU had increased its balance of payments assistance fund to €25bn and had already drawn on it to help Hungary and Latvia, and still had €15.4bn left, he said.
The EU leaders also agreed that measures used to fight the recession in individual countries must not be detrimental to other member-states.
“There was clear support for the role of the Commission as guardian of the EU treaties to avoid any kind of fragmentation of the internal market,” Mr Barroso said.
