21st Jun 2021

EU leaders paper over divisions on economic crisis

Just hours after the European Commission approved a French car aid plan, EU leaders on Sunday (1 March) sought to put a lid on damaging divisions in the bloc on how to deal with the financial crisis by saying that none of its member states is being protectionist.

"We agreed that there is no case that we see as protectionist," said Czech prime minister Mirek Topolanek, who called the informal gathering of EU leaders to discuss the threat of protectionism.

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Downplaying the public spat between Paris and Prague sparked by French comments against car companies relocating to eastern Europe, the Czech leader added: "We agreed that this is rather more a media thing than reality."

The summit had been called on the back of rising fears that internal market rules would be breached as countries sought to protect industries, particularly the car sector, from haemorrhaging jobs.

Bullish talk by Mr Sarkozy in the run-up to the summit on his right to protect industry had led to tension around the EU. But the heat was taken out of the summit after a u-turn by the French government relaxing some of the conditions for its €6 billion car industry aid plan, meaning the European Commission could give its approval to the plan just ahead of the summit.

Bad word - bad idea

After Sunday's meeting French president Sarkozy told reporters that protectionism was a "bad word" and a "bad idea."

Polish prime minister Donald Tusk, who chaired a pre-summit gathering of nine central and eastern European states said: "Everybody without exception agreed that protectionism is not a cure for the crisis. We also reached agreement that the EU will jointly try to stabilise currencies, no matter how many countries are in the eurozone."

European Commission president Jose Manuel Barroso noted that "it was very clearly stated that the internal market is the engine for recovery."

There was also a concerted effort to stop talk of an east-west divide as richer member states look to spend their way out of the crisis.

Mr Barroso stressed that each country has to be looked at on its own merits and that the region could not be viewed as a homogenous whole, while Czech prime minister Topolanek said: "I think it is clear that the EU is going to leave nobody in the lurch."

No bailout for eastern Europe

However, a push by the new member states to speed up the procedure for entering the eurozone as a way of helping them cope with the economic crisis was rejected by other EU member states. A proposal by Hungary to set up a fund of at least €160 billion for central and eastern European countries was also turned down.

German chancellor Angela Merkel rejected the need for a one-size-fits-all bailout, saying the situation in Hungary - which has been hard hit by the global credit crisis - cannot be directly compared to other countries in the region.

The final statement of the summit says that protectionism is "no answer to the current crisis" and has a line saying that support for "parent banks should not imply any restrictions on the activities of subsidiaries in the EU host countries." Eastern member states fear that if parent banks in western countries get into financial trouble they could withdraw capital from their daughter banks in eastern Europe.

Although diplomats said there was a harmonious atmosphere around the table, little of substance was agreed.

Business group Eurochambres complained about the results of the meeting, saying there were no "tangible actions."

"This summit was yet another rather unproductive political showpiece, bringing no concrete solutions to the dramatic economic situation and showing a worrying lack of economic co-ordination among member states. We deeply hope that the spring European Council will do better in a couple weeks time," said secretary general Arnaldo Abruzzini.

EU leaders are due to meet for their regular spring meeting on 19-20 March.

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