E.U. Leaders Reject Bailout for Eastern Europe

Daniel 2:41-43
41 And whereas thou sawest the feet and toes, part of potters' clay, and part of iron, the kingdom shall be divided; but there shall be in it of the strength of the iron, forasmuch as thou sawest the iron mixed with miry clay. 42 And as the toes of the feet were part of iron, and part of clay, so the kingdom shall be partly strong, and partly broken. 43 And whereas thou sawest iron mixed with miry clay, they shall mingle themselves with the seed of men: but they shall not cleave one to another, even as iron is not mixed with clay.

European Commission President Jose Manuel Barroso, right, shares a word with European Central Bank President Jean Claude Trichet prior to a meeting at EU headquarters in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put recession behind them. (AP Photo/Virginia Mayo) (Virginia Mayo - AP)

European Commission President Jose Manuel Barroso, right, gestures toward Poland's Prime Minister Donald Tusk prior to a meeting at EU headquarters in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

European Commission President Jose Manuel Barroso, right, shakes hands with Greek Prime Minister Costas Karamanlis prior to a meeting at EU headquarters in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put recession behind them. (AP Photo/Virginia Mayo) (Virginia Mayo - AP)

British Prime Minister Gordon Brown, left, shakes hands with Czech Prime Minister Mirek Topolanek during arrivals for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

Czech Prime Minister Mirek Topolanek waits for EU leaders during arrivals for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

French President Nicolas Sarkozy, left, shares a word with Czech Prime Minister Mirek Topolanek during arrivals for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

Czech Prime Minister Mirek Topolanek, right, shakes hands with Spanish Prime Minister Jose Luis Rodriguez Zapatero during arrivals for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

Slovenia's Prime Minister Borut Pahor, right, shares a word with Czech Prime Minister Mirek Topolanek during arrivals for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

Czech Prime Minister Mirek Topolanek, left, shakes hands with Swedish Prime Minister Fredrik Reinfeldt during arrivals for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

Czech Prime Minister Mirek Topolanek, right, shakes hands with Belgian Prime Minister Herman Van Rompuy during arrivals for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

German Chancellor Angela Merkel speaks with the media as she arrives for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

German Chancellor Angela Merkel speaks with the media as she arrives for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

German Chancellor Angela Merkel arrives for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

Czech Prime Minister Mirek Topolanek waits for EU leaders during arrivals for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

Poland's Prime Minister Donald Tusk gestures while speaking during a media conference prior to an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Thierry Charlier) (Thierry Charlier - AP)

Irish Prime Minister Brian Cowen arrives for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Virginia Mayo) (Virginia Mayo - AP)

Italian Prime Minister Silvio Berlusconi arrives for an EU summit in Brussels, Sunday March 1, 2009. With their economies tanking and finances fraying, EU leaders meet Sunday keen to show that they will stick together and work on ideas of how to put the recession behind them. (AP Photo/Geert Vanden Wijngaert) (Geert Vanden Wijngaert - AP)

BERLIN, March 1 -- European leaders Sunday rejected a Hungarian plea for a $240 billion bailout of struggling eastern European countries, as divisions continued to fester over how to prevent economic ills from spreading across the continent.

Germany, Europe's largest economy, led opposition to the Hungarian proposal. German Chancellor Angela Merkel said a broad, regional rescue plan was ill-conceived, though she did not offer specific alternatives.

"Saying that the situation is the same for all central and eastern European states, I don't see that," she said Sunday after a European Union summit in Brussels. "You cannot compare Slovenia or Slovakia with Hungary."

Several eastern European countries have been slammed by currency devaluations and other economic ailments in recent months, as global investors have warned the region is ripe for a financial meltdown.

Hungary and Latvia have already received bailouts from the International Monetary Fund, and Romania has said it may ask for one. The European Union, World Bank and other financial institutions have also approved aid, but national leaders say much more is needed.

The 27-member European Union, hamstrung by political infighting, has been unable to agree how to respond. The EU was created as a common economic market; its members spent a generation easing border restrictions, coordinating regulations and harmonizing fiscal policies. But faced with the worst global economic crisis since World War II, members are accusing each other of protectionist impulses and national rivalries.

Hungary's prime minister, Ference Gyurcsany, had proposed the massive rescue fund for eastern Europe last week. On Sunday, he warned that old conflicts could re-emerge and that "large-scale defaults" would result if the EU didn't come to the aid of its newest members, who have spent the last two decades trying to recover from communism.

"We should not allow a new Iron Curtain to be set up and divide Europe into two parts," Gyurcsany told reporters in Brussels, prior to the start of the summit. "This is the biggest challenge for Europe in the last 20 years."

Disagreements are so widespread that EU leaders actually held two separate summits Sunday.

In the first, elected officials from eastern European countries, which were granted admission to the EU starting in 2004, gathered in Brussels to discuss how to give their region more of a voice in deliberations that have historically been dominated by the continent's economic powers: Germany, France, Britain and Italy.

Eastern European officials said they were frustrated that few of them have been included in talks with the United States, China, Japan and western European countries over how to respond to the global economic crisis.

"None of those people around the table are actually from a country that is in the catching-up period in the EU," Mikolaj Dowgielewicz, Poland's minister to the EU, said Sunday, referring to the time since the collapse of communism two decades ago. "You have lots of old member states. There is certainly an issue here."

Several eastern European countries also want the EU to make it easier for them to replace their unstable currencies -- such as the Polish zloty and the Hungarian forint -- with the euro. Germany, France and other western countries have insisted the new members follow a strict, gradual path into the euro club that limits deficit spending. The recession, however, has made the rules more painful to follow.

At the same time, eastern European leaders have been squabbling among themselves, with officials from relatively healthy economies taking pains to distance themselves from their weaker neighbors.

Poland and the Czech Republic, for instance, also frowned on the Hungarian bailout proposal, saying they did not need to be rescued and did not appreciate being lumped together. "When it comes to any specific plans for eastern Europe, we don't need those plans," Dowgielewicz told reporters.

"We do not want any new dividing lines," added Czech Prime Minister Mirek Topolanek, whose country sponsored the summit and holds the rotating EU presidency until July. "We do not want a Europe divided along a north-south or an east-west line."

Posted : By Craig Whitlock

Washington Post Foreign Service
Sunday, March 1, 2009; 4:16 PM