EU leaders hold extra economic summit

BRUSSELS — European Union leaders are spending an unusual amount of time together, with two extra summits scheduled to address the global financial crisis.

The Czech government — which is in the midst of its six-month turn as head of the European Union — has added two “informal” head-of-state gatherings to the two regular summits held during each six-month period, making for two Brussels summits in the next three weeks. In addition, last weekend the German government hosted the European members of the G20 (Britain, France, Germany and Italy plus special invitees Luxembourg, the Netherlands, Spain and the Czech presidency). That group will gather again at an April meeting in London.

In spite of all the meetings, many observers say the divisions revealed by the economic difficulties pose the most troubling challenge to European unity in decades.

Discomfort over the looming specter of protectionism in western Europe prompted the Czech presidency to add a March 1 economic summit. The Czechs also felt pressure from France and Germany for an early meeting to lay the groundwork for the scheduled March 18-19 summit. Another extra meeting expected in May should focus more specifically on employment issues.

Czech Prime Minister Mirek Topolanek had more than altruistic reasons to tackle the rifts. In addition to announcing a new 6 billion euro ($7.6 billion) aid plan for French automakers, French President Nicolas Sarkozy had recommended the companies close down factories in the Czech Republic to make sure French workers remain employed. The move raised both hackles and questions about a violation of EU common market rules.

“Some member states call for more protectionism; others call for adherence to rules,” Topolanek said upon announcing the summits, in a thinly veiled jab at Sarkozy.

But the French aren’t the only western Europeans to consider unusual economic measures. Italy and Spain have also  announced assistance programs for their carmakers. Bitterness in eastern and central European members over actions like these — which they largely cannot afford to duplicate — has led European Commission President Jose Manuel Barroso to plead for community-minded conduct. He has repeatedly condemned the “go-it-alone approach” and recently added more urgency to his rhetoric: “We could lose the greatest single asset we have in the fight against recession: the single market.”

But newer member states aren’t betting on Barroso’s message. Leaders from countries that were not invited to the Europe G20 summit in Berlin were angered by the short guest list for discussions on topics that affect them all. So Poland spearheaded the organization of a “mini-summit” of nine eastern and central European leaders this Sunday to coordinate the countries’ input into the 27-member meeting that will take place immediately afterwards.
 

These developments have led not only to the oft-repeated concern about divisions within the EU, but even more worrisome, to fears that the bloc is dividing between “east” and “west.” Topolanek has spoken of “discrimination” against the new members by the European Central Bank with regard to access to financing. This is a pressing concern of late because the larger western bank entities that own many of eastern Europe’s banks have scaled back operations in the region.

Some welcome relief was announced Friday, just two days before Sunday’s summit. The World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) announced a joint program to provide 24.5 billion euros ($31 million) to the region’s desperate banking and business sectors, specifically designed to aid small- and medium-sized enterprises with equity and debt financing, loans and risk insurance.

Nonetheless, some experts are warning western Europe that it should be more sympathetic — and proactive — about the effects of the crisis on its central and eastern neighbors.

“Their problems are our problems,” writes Daniel Gros of the Center for European Policy Studies, “weigh(ing) particularly on the financial solidity of EU banks. EU banks provided the backbone of the banking and financial system in those countries and therefore they are now much exposed to the consequences of mounting capital flights and currency attacks in those countries.”

Gros’ colleague Karel Lannoo said there has been overreaction on all sides. Markets have panicked disproportionately about the economic downturn in eastern Europe, thereby contributing to it.

Lannoo lamented that no one “sees any glasses as ‘half-full’ anymore,” suggesting that eastern economies might be able to handle the crisis better than their western counterparts. He explained that the younger economies are more able to change, since they went through massive structural reforms when they became democracies during the last two decades. They carry far less public debt, he noted, and have lower liability because of smaller public spending programs. The eastern and central European members could actually recover fastest from the crisis, he speculated.

Lannoo said the double summits Sunday are another over-reaction, coming so close to the formal meeting just over two weeks later.  A “real effort” to infuse the 27 members with solidarity could make the meeting worthwhile, he said.

But after a meeting of the 27 foreign ministers earlier this week, Finnish Foreign Minister Alexander Stubb surveyed the busy summit calendar with more concern than hope, calling it “institutional chaos.”

“Never in the EU’s history has there been a period like this with so many cliques,” Stubb said.

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