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EU summit to give cool response to bail-out calls

Published 02/28/2009, 06:18 PM
Updated 02/28/2009, 06:24 PM

* Czech PM urges no more EU divisions

* Officials cool on eastern aid calls

* Details scarce on French plan for European auto sector

By Mark John

BRUSSELS, March 1 (Reuters) - Appeals for a bail-out of Europe's weakest economies will face a cool response at an EU summit on Sunday, with those seeking aid likely to be told they must also put their finances in order.

Officials played down chances of European leaders taking any decision on Hungary's call for a 180-billion-euro ($228 billion) aid package for central and eastern Europe, whose currencies have taken a battering as the economic outlook worsens.

The three-hour meeting in Brussels instead risks presenting to voters and world markets the image of a 27-nation bloc too paralysed by internal differences to tackle a financial crisis which has strained the euro and core EU notions of solidarity, open markets and budgetary restraint.

The talks are the latest in a string of top-level encounters leading up to April's G20 summit in London, where the Europeans want to show new U.S. President Barack Obama the continent is a trade partner to be reckoned with.

"We do not want any new dividing lines. We do not want a Europe divided along a North-South or an East-West line," Czech Prime Minister Mirek Topolanek, whose small ex-communist country holds the rotating EU presidency, said ahead of the meeting.

"Efforts and measures to fight the economic crisis within the EU must respect the principle of solidarity, but they also require that all players show responsibility," he said, echoing calls elsewhere for recipients of any aid to execute difficult reforms and fiscal discipline.

Observers have accused some eastern newcomers to the bloc of wrongly betting they could rapidly attain Western living standards through euro-denominated loans -- a gamble that has backfired as the recession sent local currencies crashing.

Officials said that Budapest could expect moral support for its predicament on Sunday but not new aid, pointing to the announcement by European finance bodies and the World Bank on Friday of 24.5 billion euros of financing for local banks.

"No one wants to throw Hungary overboard, but no one knows where it could come from, this money," one EU diplomat said of Prime Minister Ferenc Gyurcsany's call for extra support.

"COMING OF AGE" CRISIS

With U.S. carmaker General Motors asking Germany to stump up billions of euros of state aid for struggling European unit Opel -- one of many auto firms hit by the downturn -- EU leaders will also debate how to tackle rising labour unrest in the region.

French President Nicolas Sarkozy, backed by Italy's Silvio Berlusconi, has said he will come to the meeting armed with a call for joint European action to ensure local industry does not lose if the United States props up its key national employers.

Diplomats said Paris had yet to circulate any concrete ideas and that the prospect of implementing a pan-European industrial policy still alienated many, not least Germany.

"People are talking about the split between east and west (of the EU), but the French-German split is what is really going on," said one EU official of the failure of the two countries traditionally seen as the EU's driving force to see eye-to-eye.

Other issues on the table for Sunday are no less momentous, including what euro countries should do to rescue a fellow currency member in trouble, and whether to rush new states into the euro club to shelter them from further volatility -- all questions on which there is still precious little consensus.

"This is tremendously embarrassing for EU policymakers who spent the first 12 months of the crisis congratulating themselves on the supposed greater resilience of their economies," said Unicredit analyst Marco Annunziata.

"This is a coming of age crisis for the EU." (Editing by Ralph Boulton)

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