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EU Rejects 190 Billion Euro Bailout For Eastern Europe

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  • EU Rejects 190 Billion Euro Bailout For Eastern Europe

    EU REJECTS 190 BILLION EURO BAILOUT FOR EASTERN EUROPE

    PanARMENIAN.Net
    02.03.2009 11:27 GMT+04:00

    /PanARMENIAN.Net/ German Chancellor Angela Merkel and other EU leaders
    have flatly rejected a new multibillion euro (dollar) bailout for
    Eastern Europe, suggesting that additional aid be given to struggling
    nations only on a case-by-case basis.

    Germany and the Netherlands also shot down suggestions at the
    one-day EU summit 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," Merkel said Sunday, 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 â~B¬190 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 â~B¬25 billion ($32 billion) in reserve to help
    member nations. It already gave â~B¬9.6 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 â~B¬300 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 EU 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
    to amount to 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 â~B¬7 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 IHT reports.
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