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EU leaders seek united front amid ‘new iron curtain’ fears

Published on March 01, 2009

BRUSSELS - The deepening recession has forced some western nations to bail out their ailing banks and industries, the auto sector in particular, leading to the protectionism uproar among their eastern partners.

"We should not allow a new iron curtain to be set up and divide Europe in two parts," stressed Hungarian Prime Minister Ferenc Gyurcsany, whose country is among the worst hit.

Czech Prime Minister Mirek Topolanek, in a pre-summit message, urged his fellow EU leaders not to divide Europe again through "beggar thy neighbour" protectionist policies as recession bites.

"We do not want any new dividing lines; we do not want a Europe divided along a North-South or an East-West line; pursuing a beggar-thy-neighbour policy is unacceptable," asserted Topolanek, whose country holds the EU’s rotating presidency.

The fears of an East-West, or small nations versus big nations, split was underlined when just ahead of the full EU summit in Brussels the leaders of nine central and eastern European nations met to thrash out their own common stance in the face of the economic crisis.

According to a draft summit statement, the EU leaders will commit to using their vast single market as the engine for recovery and ensure that the EU’s efforts to promote open markets are reflected elsewhere.

EU nations must "make the maximum possible use of the single market as the engine for recovery, to support growth and jobs," said the draft statement, seen by AFP.

EU states "recognise that unblocking the credit channel is crucial for the effectiveness of fiscal impulses undertaken by the member states," it added.

Hungary circulated its own proposal for a "multilateral European stabilization and integration programme" to support central and eastern European economies.

Central Europe’s refinancing needs this year will be around 300 billion euros (380 billion dollars), Hungary said in a statement.

The sought-after funding, put at 160-190 billion euros, should come from the IMF, the World Bank and EU institutions, according to Hungary.

Representing the two sides of old and new Europe, France and the Czech Republic have been at the centre of the protectionism row.

French President Nicolas Sarkozy has announced plans to lend PSA Peugeot Citroen and Renault three billion euros (3.9 billion dollars) each and other measures in exchange for a promise not to shut plants in France or move to cheaper sites "in the Czech Republic or elsewhere".

That is the kind of "economic nationalism" that the eastern partners as well as the European Commission has been railing about.

The European auto sector is among the worst hit as unemployment rises and consumer and business confidence fall. It is also one of Europe’s biggest employers, with 12 million jobs at stake.

In a move to ease the tension, the EU Commission on Saturday declared itself satisfied with guarantees from Paris that the French plan to boost its ailing auto sector is not protectionist.

However the last-minute bonhomie is not enough to wipe out the protectionism fears.

"Europe will only overcome the crisis if we act together in a coordinated way and if we abide by the (EU) Community rules," said Topolanek in his statement.

The goal is for Europe to speak with a strong, united voice and work together to regain market confidence and get credit flowing.

They hope that united front will be visible at a G20 meeting in London next month.

The flow of credit has remained at a trickle despite numerous bank bailouts across European and an earlier EU initiative for a 200 billion euro stimulus package.

Paul Harrington / AFP/ Expatica