Economic Crisis
October 29, 2008
The European Commission said on Wednesday, Oct. 29, it was extending 6.5 billion euros ($8.4 billion) in emergency credit to Hungary.
The eastern European country, which does not have the euro, has run into liquidity problems due to the devaluation of its currency amidst the global economic crisis. The Hungarian forint has lost almost 20 percent of its value in the past month against the euro and the dollar.
"We all know that some other EU member states and some neighbors of the EU are under stress in their financial and exchange-rate markets, and we are ready to act," said EU Economic and Monetary Affairs Commissioner Joaquin Almunia.
The EU also raised the amount available to non-euro member states for emergency balance-of-payments aid from 12 billion euros to 25 billion euros.
EU Commission chief Jose Manuel Barroso said the increase demonstrated the solidarity among the bloc's members.
"We also stand ready to provide substantial medium-term financial assistance to other member states experiencing balance-of-payments pressures or serious financial stability risks," Barroso said.
The EU's three Baltic members as well as Bulgaria and Romania are currently battling serious deficits, although none has formally asked the union for credit help.
The plan, the plan!
But the bloc has also acknowledged that loans alone won't be enough to keep the EU from sliding into recession. Barroso said the EU executive would present a "comprehensive European Union recovery plan" on Nov. 26.
That plan is set to include increasing funds available to the European Investment Bank to make loans to small and medium-sized businesses.
Other idea that have been suggested are to make it easier for unemployed people to access EU funds to start businesses and to ensure that other European funds available for public investment are being used effectively.
Another key, Barroso said, was innovation.
"We need to find innovative funding for a wide range of transport, energy and high- technology networks which can provide jobs in the short-term and also contribute to sustainable growth in the long-term," he added.
Proactive vs. protection
Brussels is clearly worried the financial crisis could cause unemployment, which would then send Europe's economies into worse of a downward spiral.
Many individual member states, including Germany, have developed national recovery plans. But the Commission chief warned against country-first, bloc-second economic policies.
"The global financial crisis is not an excuse for protectionism: trade barriers ship out prosperity and open the gates instead to short-term economic populism," Barroso said.
He also cautioned against the idea that the best approach would be to pump government money into industry on the national level.
"It would be a mistake to think that the solution for the current crisis is a public subsidizing of all the problems we have," Barroso said.
He stressed that the various national economies were inevitably linked to one another.
"On the real economy, as on the financial markets, we must swim together or we will sink together," Barroso said. "EU cooperation is not an optional extra. It is the only way for 27 interconnected economies to weather the storm."