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Europe Tackles Economies

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The New York Times

Published: February 23, 2009

BERLIN - The leaders of Germany, Britain, France and other European nations called Sunday for the resources of the International Monetary Fund to double, to $500 billion, to help head off new problems in countries already hit hard by the global economic and financial crisis.

And in a statement clearly aimed at hedge funds and other big private pools of capital, the leaders said that "all financing markets and participants" must be regulated in the future. They also vowed to press for sanctions against tax havens.

The meeting, which also included leaders from Italy, Spain, the Netherlands and the Czech Republic, the current holder of the European Union's rotating presidency, was an effort to hammer out a common European position ahead of the April meeting of the G-20, the group of industrialized economies and developing countries, in London.

Eyeing a contagion that is rapidly spreading to Eastern Europe and even countries that use the euro, the leaders highlighted the crisis-prevention role of the IMF, an institution whose relevance to the current global economy seemed in doubt a few years ago.

In Germany, a growing unease that the crisis is about to strike close to home has contributed to a shift in the country's reluctance to bankroll efforts to ease the financial crisis - whether in the form of bank bailouts or stimulus packages - for fear of paying for other countries' mistakes.
German officials appear to have concluded that their own economy, underpinned until recently by booming exports, cannot stay afloat if its neighbors crash. Also, international officials from the IMF and the World Bank have argued strongly in private to German officials that Berlin was underestimating the extent to which the crisis was tearing at the hard-fought economic integration of Europe.

In Eastern Europe, currencies have tumbled sharply against the euro as financial markets bid up the odds of an all-out collapse along the lines of Asian countries in the late 1990s. Already, Hungary and Latvia, both European Union members that do not use the euro, have gotten rescue packages from the IMF and the European bloc.

And among the countries that use the euro, particularly Greece and Spain, financial chaos has meant that government borrowing costs have grown in relation to stalwarts such as Germany.

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