The global financial crisis is the worst economic downturn in living memory and the EU is providing a lot of aid to those new European Union members who have been hit particularly hard, EU officials said on Monday.
They defended decisions taken by the bloc on Sunday to prop up single states that needed help but not to launch blanket aid coverage and said Monday's drop in the region's currencies had not been linked to that approach.
There is no doubt that we are living through the greatest financial and economic crisis in living memory, European Commission President Jose Manuel Barroso said at a commemoration of the fifth anniversary of EU enlargement to eastern Europe.
It is the first synchronized crisis we have globally. This is the first time that we have this contraction simultaneously of trade and world GDP, the first time since 1947.
European Economic and Monetary Affairs Commissioner Joaquin Almunia said some east European EU members were hit especially hard, but stressed not all were in the same situation.
All the member states that have seen a credit boom are experiencing similar vulnerabilities. But the problem appears particularly acute for some of the Union's newest members, he said.
The EU leaders rejected calls by Hungary -- which has already received a $25 billion bailout led by the IMF and the EU -- for a 180-billion-euro region-wide bailout, and instead agreed to consider aid to struggling countries on an individual basis, taking into account their differing situations.
Following the decision, Hungary's forint sank 2.5 percent from Friday's closing level. The Polish zloty lost 1.7 percent and the Czech crown shed 1 percent.
Almunia told a news conference he believed Monday's selloff was not related to the decisions taking at the summit, although some analysts said the market had hoped for a broad package.
Today, the markets have started very weak in Asia and I do not think they reacted to the decision the EU adopted yesterday, Almunia said.
DEFENDING CASE-BY-CASE APPROACH
Almunia told said the EU had provided capital via European institutions and its development funds, including a 24.5 billion euro package prepared by the World Bank, the European Investment Bank and the European Bank for Reconstruction and Development.
He said it was wrong to suggest -- as some private sector banking analysts said -- that the EU was falling short of what was needed to support the whole group of the new member states.
It is completely unfair, this kind of messages some people are sending during the last weeks. The EU is giving strong support, is channeling a huge amount of resources, he said.
He backed the argument for differentiating among countries.
Not all the countries are in the same situation. You cannot compare the situation of Latvian economy to the situation of the Czech economy, he said.
The Czechs and Poles have been campaigning to convince markets they are more stable than some of their peers thanks to lower foreign debt and more stable banking systems.
On the other side, Latvia, like Hungary, has taken an IMF-led support deal after a capital flight and sharp drop in economic output, and its prime minister said on Monday that 2009 would be a fight for the country to remain out of bankruptcy.
The Czechs say they do not need any aid. But some analysts say investors will continue to lump them all together until the entire region is underpinned by a joint plan.