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Emergency EU Summit Puts Premium On Unity

Even as French President Nicolas Sarkozy talks of protectionist measures, he and German Chancellor Angela Merkel will be looked to to bolster the common market.
Even as French President Nicolas Sarkozy talks of protectionist measures, he and German Chancellor Angela Merkel will be looked to to bolster the common market.
BRUSSELS -- As they gather for a short emergency summit in Brussels, European leaders will be battling centrifugal forces.

Struggling to keep their industries afloat, governments in Europe are increasingly turning to measures to protect their markets from competition -- and from other EU member states.

Tensions are rising within the 16-country eurozone as the weaker economies look above all to Germany to help finance their skyrocketing borrowing costs. In Eastern Europe, the flight of Western investment has left entire economies on the brink of collapse.

The crisis has now acquired such proportions that observers are warning that managed badly, it can end up destroying much of what the EU has achieved over the past 20 years.

On February 28, the British daily "The Independent" warned in an editorial that a "domino-style" collapse of Eastern European economies "could conceivably drive these nations back into the arms of Russia." This would mean, the editorial argued, that "all the geopolitical gains made by Europe since the fall of the Iron Curtain could be lost.

The historian Timothy Garton Ash warned in "The Guardian" on February 26 that all of the EU's "three circles" -- the eurozone, eastern EU members, and countries outside like Ukraine -- are under threat.

Struggling For Unity

EU leaders this week responded by issuing calls for unity. The president of the European Commission, Jose Manuel Barroso, put out a statement on February 26 warning that the short-term gain produced by protectionist measures could undermine the bloc's future.

"President Barroso would like to underline at that occasion on Sunday that the strength and scale of our internal market has been a major source of Europe's success and prosperity in recent years; and he will stress the message that our internal market drives our productivity and competitiveness and its should remain a guideline in the way out of the economic crisis," commission spokesman Amadeu Altafaj Tardio said in reading out the statement.

The EU's "single market" where goods, services, labor, and money flow freely is the cornerstone of the bloc's success. But the member states' budgetary and tax policies have remained essentially uncoordinated, and diverging national interests are putting the bloc's unity under growing stress.

The remarks are above all directed at Paris, Berlin, and London, where governments want to inject funds into their ailing industries, above all car manufacturers.

Barroso said that the March 1 summit -- called by the EU's Czech presidency after the French government appeared to encourage its car makers to pull out of Eastern Europe -- is a "chance" for the EU to show it can make a difference working together.

Barroso identified as the top issue the stabilization of the EU's financial sector, above all restoring credit flows. Eastern European states are particularly badly affected, given that the growth of their economies has over the past two decades been largely driven by Western investment, some of which is now fleeing.

Liabilities in the east, in turn, are affecting the more affluent west, where banks stand to lose tens of billions of euros. The EU's common currency has also come under pressure.

International Aid

On February 27, the European Bank for Reconstruction and Development, the European Investment Bank, and the World Bank jointly said they will lend Eastern European countries 24.5 billion euros ($31 billion).

Speaking at a news conference in Budapest, Hungarian Prime Minister Ferenc Gyurcsany said the region needs at least 180 billion euros. Hungary, together with Latvia, has already had to be bailed out by the International Monetary Fund (IMF).

Estonia, Lithuania, Romania, and Bulgaria are also reeling from the crisis. The value of the Polish zloty has decreased sharply, but together with the Czech Republic and Slovakia, it is in relatively better shape.

Beyond the EU's eastern borders, Ukraine's economy is on the brink of collapse despite IMF funding.

The economic woes are giving rise to political recriminations. Eastern European governments are worried new boundaries are emerging within the EU, effectively marginalizing their countries. They are less worried by acts of industrial protectionism by their western peers than by the prospect that recapitalized with taxpayers' money, western banks will be long loath to return to eastern markets.

The March 1 EU summit is the first in a series of top-level meetings devoted to the economic crisis, with EU leaders returning to Brussels on March 19-20 for a scheduled summit, the G20 meeting in London on April 2, and another extraordinary EU "jobs summit" in May.

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