EU leaders to double crisis fund

Czech leader says bloc will increase bailout fund for struggling nations to $68bn.

    EU leaders are pressing nations to help double the IMF's resources to $500bn  [AFP]

    Romania is seeking a bailout from the EU and the International Monetary Fund (IMF).

    European Union leaders at the two-day summit, which began on Thursday, are also pushing for the funding of the IMF to be increased to $500bn.

    Nicolas Sarkozy, the French president, said on Friday that the EU would pay for a third of the increased funds. The bloc is expected to press G20 nations and emerging economies to provide the rest.

    Leaders also agreed to spend $6.8bn for new power grids and green energy.

    Fiscal restraint

    The announcement comes a day after EU leaders rejected calls for more government spending as a way to dig themselves out of recession, despite nationwide strikes in France, sagging company results in Germany and gloomy unemployment figures in the UK.

    Topolanek called more spending on the deficit "a deadly idea".

    "Trying to outdo one another with promises will certainly not bring any calm to the situation"

    Angela Merkel,
    German chancellor

    He said EU nations need to know whether a $270bn spending package is working before digging into depleted state coffers for more.

    EU leaders stood firm against new stimulus deals even after an announcement late on Wednesday that the US Federal Reserve would launch a $1.2 trillion effort to lower rates on mortgages and other consumer debt.

    While that is aimed at increasing the amount of money in the economy, not the amount of government spending, it underlines the contrast between the European stance and a US approach, which is piling on debt a lot faster.

    Angela Merkel, the German chancellor, who has led calls for European fiscal restraint, said: "Trying to outdo one another with promises will certainly not bring any calm to the situation."

    Both Merkel and Nicolas Sarkozy, the French president, have argued that excessive public debt threatens global stability and countries must move swiftly to pay off debt when they can.

    The heavy impact of recession is hitting a growing number of Europeans.

    About three million people protested against the government's handling of the economic crisis in France on Thursday, while German companies reeled off bad results and the UK appeared to be heading for its worst employment figures since the second world war.

    About 18 million people are believed to be unemployed in the EU, about 7.6 per cent of the overall working population.

    SOURCE: Agencies


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