- The Washington Times - Sunday, March 1, 2009

BRUSSELS (AP) — Germany rejected appeals Sunday for a single multibillion-euro bailout of eastern Europe, even after Hungry begged European Union leaders not to let a new Iron Curtain divide the Continent into rich and poor.

The swift, strong comments by German Chancellor Angela Merkel dampened hopes that leaders at Sunday’s EU summit could forge a unified stance to tackle the worsening economic crisis.

As Europe’s largest economy, Germany has been under rising pressure to take the lead in rescuing eastern EU members, but Mrs. Merkel insisted that 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 Mrs. Merkel, adding, “You cannot compare” the dire situation in Hungary with that of other countries.

Hungarian Prime Minister Ferenc Gyurcsany, saying the credit crunch was hitting the eastern members hardest, had called for an EU fund of up to 190 billion euros ($241 billion) to help restore trust and solvency in those nations.

“We should not allow that a new Iron Curtain should be set up and divide Europe,” Mr. Gyurcsany told reporters. “In the beginning of the ‘90s 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 in the 27-nation bloc 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 zone, which could offer them a stable financial anchor. Latvia’s government already has collapsed amid the economic fallout.

Other EU members, such as 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 a commitment to “make the maximum possible use” of the EU’s cherished free market “as the engine for recovery.”

“(The EU) 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-neighbor policy is unacceptable,” Mr. Topolanek said.

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 rejected earlier 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 Group of 20 nations summit in London on April 2.

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.

Mr. Gyurcsany said eastern EU countries could need up to 300 billion euros ($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 the countries’ 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 300 billion euros ($380 billion) in bank recapitalizations and put up 2.5 trillion euros ($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 jointly will provide 24.5 billion euros ($31.1 billion) in emergency aid to shore up the battered finances of eastern European nations.

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