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Germany

Opinion: EU Leaders Bounced into Action by the Financial Crisis

EU states have demonstrated the importance of holding together in the global financial crisis and have signaled their willingness to act, says Deutsche Welle's Bernd Riegert, after Sunday's summit meeting in Brussels.

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The financial and economic crisis is spreading at breathtaking speed. It has taught us one thing. Political principles that seemed unshakeable just a few weeks ago no longer apply. And no one can predict with certainty what action will be needed to avert catastrophe in the weeks ahead.

The explicit "no" to a rescue plan for the ailing economies of Eastern Europe may also not stand the test of time. German Chancellor Angela Merkel and Czech Prime Minster Mirek Topolanek whose country currently holds the rotating EU presidency, are currently resisting calls for EU cash injections for Hungary, Latvia, Romania, Bulgaria et al.

Bernd Riegert

Deutsche Welle's Bernd Riegert

But is the Hungarian Prime Minister Ferenc Gyurcsany exaggerating when he says that EU member states in Eastern Europe need a support fund of up to 190 billion euros to restore solvency? Or could some EU states really be at risk of bankruptcy in the near future because they cannot afford private sector loans? As recently as December, many eastern European governments were maintaining that they had not been hit by the financial crisis. Now, they are standing at the edge of the abyss.

And things continue to develop apace. There are already signs that the financial crisis could also endanger the euro, which is used by 16 EU states. The euro is already feeling the pinch on the currency markets. EU Commissioner for Economic and Monetary Affairs Joaquín Almunia has warned about the danger of the flight of capital. Ireland, Greece, Spain and Italy are finding it increasingly difficult to find buyers for their government bonds. Germany, one of the biggest and strongest EU economies, balks at having to step in and prop up other member states because it would mean that it would also have to increase the interest rates on its own government bonds to attract buyers. EU leaders did not come up with any answers to these particular questions at their hastily convened summit meetings.

However, state representatives were at least united in speaking out against protectionism. They were adamant that the single market must continue to function and that no countries should go it alone. That is a good thing. In the current financial situation any seizing up of the internal market would quickly lead the EU into rack and ruin.

EU members also agree that there is a need to tighten regulation and oversight for banks. They intend to co-ordinate the states' rescue plans and economic stimulus programs.

The bloc is also making progress on the issue of how to deal with the problem of the worthless -- so-called toxic -- assets held by European banks. EU members have reached a consensus on the need to establish common standards. They also agree that state debt, despite the burden of expensive stimulus programs, should not be allowed to spiral out of control. This degree of unity would have been unthinkable just a few months ago. The Europeans are being bounced into taking action by the force of events.

But the Europeans must now make sure that they act resolutely at the summit of the world's 20 most important economic powers on 2 April in London. Some of the problems being faced elsewhere put the difficulties faced by some European states into perspective, and threaten to overshadow them. Europe has to ensure that it remains competitive.

The impromptu summit in Brussels has shown that the small EU member states are not prepared to be left out. The meeting was a retort in kinds to last week's meeting in Berlin ahead of the G20 summit where only the major EU states. But now is not the time for internal squabbling. This crisis is far too serious for that.

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