EU Rejects Eastern Europe Bailout
by Rebekah Manning
EU leaders ruled out a regional bailout plan for Eastern Europe. Germany and the Netherlands also suggested that struggling Eastern European countries that experienced plummeting currencies be granted quick access to the euro. But French President Nicolas Sarkozy said that the Eastern European nations can look into the euro membership criteria and the two-year waiting period after the economic crisis is over.
Threat of Protectionism
The European Union is experiencing the strains that the economic crisis has bought to its 27 members at various stages of development. These pressures have bought the threat of protectionism to the surface. Concerns about protectionism became increasingly evident as France aided its auto industry on the condition that it cannot move production out of the country.
Though the move was deemed “free of protectionism” by the European Commission, there are fears that individual governments will start bailing out businesses at the expense of member countries. According to Polish Prime Minster Donald Tusk, “We must always resist the temptation of protectionism”. British Prime Minister Gordon Brown agrees with this; he also said that protectionism should be at the heart of the response to the current economic crisis.
Yahoo News – EU stance against protectionism
Voice of America – confronting the threat of protectionism
Potential Consequences of the Rejection of Eastern European Bailout
Hungarian Prime Minister Ferenc Gyurcsany warned that “We should not allow that a new Iron Curtain should be set up and divide Europe”. Specific economic problems come from newer members that were from the Soviet bloc made matters more challenging. Gyurcsany claims that the failure to provide multi-billion dollar bailouts can lead to bigger problems and “massive contractions”. This would affect the whole European continent because of political instability and immigration concerns.
The 16 countries that use euro as their currency must submit to the European Central Bank. This prevents economies including Spain, Ireland, Greece, and Italy from taking radical steps to rejuvenate their own economies. Germany has once said that it will not bail out other members by giving up the deutsche mark, its strong currency. Because of the economic situation though, Germany is now faced with the possibility that their currency be put at risk to comply with European fiscal policies.
International Herald Tribune – Germany rejects Eastern Europe bailout
Ohio – pressures within EU member countries
Euro Suffers More Losses
After European leaders ruled out the bail-out plan for Eastern Europe, the euro fell sharply against the dollar. In London on late Monday morning, the euro was trading 1.2603 dollars from 1.2671 on Friday.
As the stock market continues to slide, dealers are also buying the dollar as it is perceived as a safe investment. But against the yen, the dollar fell to 97.21 from 97.65 on Friday.
Market Watch – euro sinks after Eastern Europe aid plan failed to push through
Google News – the euro drops against the dollar after EU rejects bailout
Tags: Bailout, eastern europe, European Union
About the Author - Rebekah Manning
Rebekah started in the Forex industry as an intern in 2001, and worked her way up the ranks to a C-level management position. She enjoys the field of trading as well as MMA fighting, shooting ranges, and action movies.
