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EU leaders hold extra economic summit

Leaders hope Sunday's talks in Brussels will be a step toward coordinated action.

These developments have led not only to the oft-repeated concern about divisions within the EU, but even more worrisome, to fears that the bloc is dividing between “east” and “west.” Topolanek has spoken of “discrimination” against the new members by the European Central Bank with regard to access to financing. This is a pressing concern of late because the larger western bank entities that own many of eastern Europe’s banks have scaled back operations in the region.

Some welcome relief was announced Friday, just two days before Sunday’s summit. The World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) announced a joint program to provide 24.5 billion euros ($31 million) to the region’s desperate banking and business sectors, specifically designed to aid small- and medium-sized enterprises with equity and debt financing, loans and risk insurance.

Nonetheless, some experts are warning western Europe that it should be more sympathetic — and proactive — about the effects of the crisis on its central and eastern neighbors.

“Their problems are our problems,” writes Daniel Gros of the Center for European Policy Studies, “weigh(ing) particularly on the financial solidity of EU banks. EU banks provided the backbone of the banking and financial system in those countries and therefore they are now much exposed to the consequences of mounting capital flights and currency attacks in those countries.”

Gros’ colleague Karel Lannoo said there has been overreaction on all sides. Markets have panicked disproportionately about the economic downturn in eastern Europe, thereby contributing to it.

Lannoo lamented that no one “sees any glasses as ‘half-full’ anymore,” suggesting that eastern economies might be able to handle the crisis better than their western counterparts. He explained that the younger economies are more able to change, since they went through massive structural reforms when they became democracies during the last two decades. They carry far less public debt, he noted, and have lower liability because of smaller public spending programs. The eastern and central European members could actually recover fastest from the crisis, he speculated.

Lannoo said the double summits Sunday are another over-reaction, coming so close to the formal meeting just over two weeks later.  A “real effort” to infuse the 27 members with solidarity could make the meeting worthwhile, he said.

But after a meeting of the 27 foreign ministers earlier this week, Finnish Foreign Minister Alexander Stubb surveyed the busy summit calendar with more concern than hope, calling it “institutional chaos.”

“Never in the EU's history has there been a period like this with so many cliques,” Stubb said.


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