EU leaders promise billions for Eastern Europe and IMF

21st March 2009, Comments 0 comments

The leaders agreed at a summit in Brussels to double loans available to Eastern Europe and to add extra billions to the IMF's lending capacity.

Brussels -- EU leaders pledged 125 billion euros on Friday in support for Eastern Europe and the International Monetary Fund after rejecting calls to plough more taxpayer cash into their own faltering economies.

The leaders agreed at a summit in Brussels to double loans available to Eastern Europe to 50 billion euros (68 billion dollars) and add 75 billion euros (102 billion dollars) to the IMF's lending capacity.

British Prime Minister Gordon Brown said the European leaders had agreed to do "whatever is necessary to restore jobs and growth."

"I think you will find that that is the spirit of every country, that is the spirit of the European Union," he told journalists. "Necessary action will be taken to deal with the problems of unemployment and growth and we are united in wanting to see that happen."

Europe wants to double the resources of the IMF to 500 billion dollars while Washington has suggested lifting its lending capacity threefold to 750 billion dollars.

The 75 billion euros would be Europe's contribution to the overall increase in IMF funds, which remains to be agreed by the leading economic powers.

The IMF has repeatedly warned that its resources, and therefore its ability to lend to countries in difficulty, could dwindle dangerously low if the economic crisis persists.

With Eastern Europe struggling to cope with the crisis, the leaders agreed to double a standing credit line available to EU countries that do not benefit from the shelter of the euro.

The existing 25-billion-euro credit line is being rapidly depleted after Hungary and Latvia drew nearly 10 billion euros from it and other countries starting with Romania likely to follow soon.

At the start of the month, EU leaders ruled out a regional bailout plan for Eastern Europe, opting instead to extend help to countries on a case-by-case basis as trouble emerges.

Export-dependent Eastern Europe has been hit particularly hard by the crisis due to the region's reliance on the capital of increasingly risk-averse foreign investors to finance their economies.

During the first day of the summit, the leaders rebuffed mounting calls for a big new injection of taxpayer money into their own ailing economies, tentatively agreeing only to a limited hike in energy investments.

With an estimated 4.5 million European jobs under threat this year, public anger that more is not being done to revive the economy is beginning to bubble over with over a million French workers taking to the streets on Thursday.

Washington has also pressed its European allies in the run-up to the Group of 20 major economies summit in London next month to play a bigger role in reviving global demand by doing more to prop up their economies.

"We all agree that we are going to be prudent in our fiscal stimulus, while awaiting the results of the first package of stimulus measures," Czech Prime Minister Mirek Topolanek said after chairing a first day of talks.

Even though they ruled out ambitious new economic recovery plans, the leaders reached an agreement in principle for a package of investments in energy and Internet infrastructure projects worth up to five billion euros.

European nations have been wrangling for months over what projects should benefit from the funds, which are the main EU-financed component of the bloc's combined 400 billion euro economic recovery plan.

Leigh Thomas/AFP/Expatica

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