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EU May Top Up Eastern Europe Crisis Fund

BRUSSELS (Reuters) -- European Union leaders will next week raise the possibility of topping up a 25 billion euro ($32 billion) crisis fund for hard-hit eastern European economies, a draft EU document obtained by Reuters showed.

The fund, called the balance of payments facility, is available only to non-euro zone members of the 27-nation bloc -- East European countries excluding Britain, Sweden, and Denmark.

The money is raised via bonds issued by the European Commission and, with a number of Eastern countries struggling to cope with the downturn, the fund has already been doubled.

"The commission and the council should rapidly examine the possibility of increasing the ceiling for the union's support facility for balance-of-payments assistance," said the latest draft for an EU summit starting on March 19.

It also said the commission and the council of EU finance ministers should be prepared to act in close cooperation with international financial institutions to help European countries preserve economic stability.

Freeing up more cash for Eastern Europe could help alleviate the concerns of Austria and some Western European banks about the financial stability of the region where sharp currency depreciations in some countries have raised the risk of defaults on foreign currency denominated loans.

Hungary and Latvia have received 6.5 billion euros ($8.4 billion) and 3.1 billion euros, respectively, from the EU fund as part of wider packages backed by the International Monetary Fund (IMF) to relieve pressure on their currencies and other assets.

Romania is now also in talks on using cash from the fund, although the amounts it may need are still unclear.

The summit draft comes only days after EU officials played down the need to raise the ceiling further.

"We still have some resources that haven't been used in the case of Hungary and Latvia," Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters on March 9.

"At the moment we have resources that are more than sufficient to meet the needs of a further European contribution in the context of Romania. I don't think we'll need to go beyond present limits even if there are new applications from countries," he said.