BRUSSELS, Feb 27 (Reuters) - EU leaders meeting in Brussels on Sunday will discuss possible action on the financial crisis amid concern eastern European countries may need more help.
Following are possible measures the EU could take.
WHAT CAN THE EU DO TO HELP STATES IN EU BUT NOT EURO ZONE
* The EU may grant further loans to its members outside the euro from the so-called medium-term financial assistance facility, designed under EU law for countries "seriously threatened with difficulties in their balance of current payments or capital movements".
This fund, originally designed to help EU members stabilise economies before adopting the euro currency, was increased to 25 billion euros from 12 billion euros late last year.
Hungary received 6.5 billion euros from the fund and Latvia 3.1 billion as part of wider aid packages backed by the International Monetary Fund. Diplomats say Romania and Lithuania may be next in line to receive aid from the fund.
The fund is not designed to rescue banks or help the real economy and any change in its objectives would have to be unanimously approved by the EU's 27 member states.
The Austrian Chamber of Commerce has proposed that the fund be increased to 100 billion euros, but the European Commission said on Friday the issue is not being discussed for now.
WHAT OTHER EU CASH COULD BE USED?
* The European Commission has pushed forward the release of EU regional aid funds for east European members, which should make several extra billion euros easily available in 2009-10.
The EU has earmarked some 160 billion euros of such funds for those countries in 2007-2013, with most of them to be released gradually, project by project.
The funds are part of the EU budget, worth some 125 billion annually, which is fixed well in advance and is unlikely to be used for any additional aid.
EBRD, EIB, WORLD BANK
* The World Bank, the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB) have launched a joint programme to lend up to 24.5 billion euros in the region.
The two-year plan would provide quick, large-scale financing to banks and ensure that companies, especially small- and medium-sized enterprises, get access to capital.
WHAT OTHER POSSIBILITIES ARE THERE?
* Other aid, be it loans, cash injections or standby facilities, would have to be extended by individual EU member states or groups of them.
This would be done outside the EU legal framework, although regular EU meetings could be used to negotiate the aid. Large, rich EU members are likely to be more keen to help fellow EU members than other countries, to preserve the political and economic coherence of the 27-nation bloc.
WHAT IF A SUBSIDIARY OF A WESTERN EUROPEAN BANK WAS THREATENED WITH COLLAPSE IN ONE OF THE NON-EURO ZONE EU MEMBERS?
* There is no fixed EU procedure for such eventualities.
EU officials say the most likely scenario is the one that happened when other multinational banks like Fortis or Dexia needed urgent help -- there is an emergency meeting of representatives of governments of the host country and the home country of the bank as well as supervisory authorities and shareholders and they all hammer out a deal on who pays what to keep the subsidiary afloat.
Government aid for individual banks would, however, have to be in line with the EU's competition rules.
Austria and Hungary are lobbying for a massive aid fund for central and east European banks, but have so far gained little support. (For a preview of the summit, click on [nLR887557]) (Writing by Marcin Grajewski)