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UPDATE 1-EU says crisis worst in memory, new EU states hit

Published 03/02/2009, 05:32 AM

(Adds Almunia comments, background, markets)

PRAGUE, March 2 (Reuters) - The global financial crisis is the worst economic downturn in living memory and some new European Union members have been hit particularly hard, EU officials said on Monday.

The EU is doing a lot to help those affected, and also will focus on fighting any protectionist measures that would hurt the bloc, which has a key share on the world's trade flows, they said.

Central European currencies dropped sharply on Monday after EU leaders agreed at a Sunday summit to prop up those who need help but shot down an idea of setting up one big coordinated aid package for the entire region.

"There is no doubt that we are living through the greatest financial and economic crisis in living memory," European Commission President Jose Manuel Barroso said at a Prague conference commemorating the fifth anniversary of EU enlargement to eastern Europe.

"It is the first synchronized crisis we have globally. This is the first time that we have this contraction simultaneously of trade and world GDP, the first time since 1947."

European Economic and Monetary Affairs Commissioner Joaquin Almunia said some central and east European economies had been hit especially hard and the international community was helping out.

"All in all the EU is doing huge amount to support those worst hit by this crisis," he said, but added that the aid committed so far may need a boost if the crisis deepens.

"All the member states that have seen the credit boom are experiencing similar vulnerabilities. But the problem appears particularly acute for some of the Union's newest members," he said.

The EU leaders rejected calls by Hungary -- which has already received an $25 billion bailout led by the IMF and the EU -- for a 180-billion-euro region-wide bailout, and instead agreed to consider aid to struggling countries on an individual basis, taking into account their differing situations.

Calls for differentiation have been led by the Czechs and Poles, who have been campaigning to convince markets they are more stable than some of their peers, although some analysts say investors will continue to lump them all together until the entire region is underpinned by a joint plan.

Almunia added the EU had to fight protectionism which may be raising its head, because the EU itself would suffer from disruptions of free trade flows. (Reporting by Jan Lopatka and Martin Dokoupil; Editing by Victoria Main)

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