The Jakarta Post, Constant Brand, The Associated Press, Brussels | Sun, 03/01/2009 8:21 PM
Hungary warned the European Union not to let a new economic "Iron Curtain" divide the continent and urged the 27 EU leaders meeting Sunday to act so the bloc's weakest members don't go under in the global economic crisis.
Prime Minister Ferenc Gyurcsany said the credit crunch is hitting poorer, eastern member states the hardest. The Hungarian leader called for a special EU fund of up to euro190 billion ($241 billion) to help restore trust and solvency in eastern EU members' financial markets.
"We should not allow that a new Iron Curtain should be set up and divide Europe," Gyurcsany told reporters. "In the beginning of the nineties we reunified Europe, now the challenge is whether we will be able to reunify Europe financially."
EU nations are all grappling with a worsening recession, compounded by a severe credit crunch that has left many EU countries looking ever more inward to protect jobs and companies from international competition. Those policies are now undermining the open market cornerstone on which the EU is founded.
Ahead of the summit, the leaders of nine countries - Poland, Hungary, Slovakia, the Czech Republic, Bulgaria, Romania and the three Baltic states - forged a common stand to pressure richer members to back up vague pledges of support with action.
Polish Prime Minister Donald Tusk said the nine leaders called for "a spirit against protectionism and egoism."
Hungary, Poland and the Baltic countries of Estonia, Latvia and Lithuania also want the EU to fast-track their bids to join the euro-currency, which could offer them a stable financial anchor. Latvia's government has already collapsed amid the economic fallout.
Other EU members, like Sweden, want to coordinate a Europe-wide bailout plan for car producers.
Prime Minister Mirek Topolanek of the Czech Republic, which holds the EU presidency, has called on his counterparts to act together.
A draft summit conclusion centered on the need to reconfirm their commitment to "make the maximum possible use" of the EU's cherished free market "as the engine for recovery."
Topolanek said the EU does "not want any new dividing lines. We do not want a Europe divided along a North-South or an East-West line, pursuing a beggar-thy-neighbour policy is unacceptable."
The crisis has sorely tested solidarity among EU nations.
The Czech Republic has accused France of trying to protect its local car plants at the expense of foreign subsidiaries, while Germany, the EU's economic powerhouse, has rejected calls to help bail out economies in Ireland, Greece and Portugal.
Sunday's talks are meant to restore a unified purpose and help prepare for the April 2 Group of 20 nations summit in London.
Once-booming east European economies have been hit hard by the economic downturn. As cheap credit dried up their export markets shrank, causing eastern currencies to sink and triggering more financial turmoil.
Gyurcsany said eastern EU countries could need up to euro300 billion ($380 billion), or 30 percent of the region's gross domestic production this year.
He warned that failure to offer bigger bailouts "could lead to massive contractions" in their economies and lead to "large-scale defaults" that would affect Europe as a whole. It could also trigger political unrest and immigration pressures as jobless rates soar, he said.
EU governments have already spent euro300 billion ($380 billion) in bank recapitalizations and put up euro2.5 trillion ($3.18 trillion) to guarantee loans of many banks in the EU and neighboring states.
On Friday, the European Bank of Reconstruction and Development, the European Investment Bank and the World Bank said they will jointly provide euro24.5 billion ($31.1 billion) in emergency aid to shore up the battered finances of eastern European nations.
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