EU summit leaders announced last Friday that $102 billion would be given to the International Monetary Fund (IMF) to increase the resources available to bail out struggling EU member states.
The decision came as a result of the two-day summit which was held in Brussels under the rotating EU presidency of Marek Topolanek, the Czech Prime Minister.
The summit participants also agreed to pump $68 billion into a financial aid fund for crippled member states that haven’t adopted the Euro currency yet.
Latvia, currently in a severe economic downturn, and Hungary, which is particularly exposed to the financial crisis due to high levels of government and external debt, are the two countries that already received $13 billion from the fund.
In contrast to the more aggressive U.S. approach of dealing with the economic crisis, the EU has been taking a more cautious approach.
The U.S. Federal Reserve announced last Wednesday that it will provide $1.2 trillion to pump more money into the U.S. economy in an attempt to lower mortgage rates and other consumer debt, in addition to the current $787 billion stimulus package.
The EU summit also looked towards increasing government spending to alleviate the effects of the economic crisis but with an underlying difference from the U.S. approach. The need to exercise control over member states’ internal budget spending and provisions for stricter management of products, market trading, and other financial mechanisms came out of the summit declaration.
Reportedly, the summit meetings concluded that not all problems can be resolved with taxpayer money, and that following the U.S. example is not the only possible approach. Increasing the bailout threshold is not always the best way to counteract the economic crisis. It can also send a wrong message to offer money to economic sectors or countries where it is not actually needed.
But the decision of the EU summit comes just in time as many Eastern European countries are now seeking financial help. In these countries, along with the decrease in sales tax revenues due to the fall in consumer spending, local currencies continue to lose value making it more difficult to borrow money or pay off debts.
Summit participants expressed that there should be solidarity among member states and help should be extended to those in need.
The decision came as a result of the two-day summit which was held in Brussels under the rotating EU presidency of Marek Topolanek, the Czech Prime Minister.
The summit participants also agreed to pump $68 billion into a financial aid fund for crippled member states that haven’t adopted the Euro currency yet.
Latvia, currently in a severe economic downturn, and Hungary, which is particularly exposed to the financial crisis due to high levels of government and external debt, are the two countries that already received $13 billion from the fund.
In contrast to the more aggressive U.S. approach of dealing with the economic crisis, the EU has been taking a more cautious approach.
The U.S. Federal Reserve announced last Wednesday that it will provide $1.2 trillion to pump more money into the U.S. economy in an attempt to lower mortgage rates and other consumer debt, in addition to the current $787 billion stimulus package.
The EU summit also looked towards increasing government spending to alleviate the effects of the economic crisis but with an underlying difference from the U.S. approach. The need to exercise control over member states’ internal budget spending and provisions for stricter management of products, market trading, and other financial mechanisms came out of the summit declaration.
Reportedly, the summit meetings concluded that not all problems can be resolved with taxpayer money, and that following the U.S. example is not the only possible approach. Increasing the bailout threshold is not always the best way to counteract the economic crisis. It can also send a wrong message to offer money to economic sectors or countries where it is not actually needed.
But the decision of the EU summit comes just in time as many Eastern European countries are now seeking financial help. In these countries, along with the decrease in sales tax revenues due to the fall in consumer spending, local currencies continue to lose value making it more difficult to borrow money or pay off debts.
Summit participants expressed that there should be solidarity among member states and help should be extended to those in need.
