Since the collapse of communism in Eastern Europe, former Soviet bloc countries have borrowed from western nations to finance their growing economies.
But with the global credit crisis, it has become increasingly difficult for these developing economies to raise enough capital to pay their debts.
European Union leaders have ruled out a multi-billion dollar rescue package for Eastern Europe in the face of the global economic crisis, despite warnings from Hungary that the rejection could lead to an economic "iron curtain" across the continent.
Ahead of the EU summit in Brussels, Hungary urged the European Union to show solidarity by establishing a support fund of about $240 billion to help failing economies in Eastern Europe. That was far more than the roughly $30 billion that international institutions agreed on Friday to make available.
Hungary is among the hardest hit by the global economic crisis, said this plan could prevent the creation of a new "iron curtain" otherwise it warned, the crisis would "divide Europe" between rich and poor nations.
However, Germany, Europe’s largest economy, made clear it strongly opposes a bailout plan for Eastern Europe. "The situation is very different in each EU country and aid should be handled on a case by case basis," Germany said. "You cannot compare Slovenia or Slovakia with Hungary. We help countries in need. But a one size fits all bailout is unwise."
Despite these frictions, EU leaders reached out to East European member states, saying they would not turn to protectionism to support ailing business sectors.
France recently raised concerns in Eastern Europe when it announced plans to lend French carmakers billions of dollars on the condition that they not close French plants or move operations to "the Czech Republic or elsewhere" where manufacturing costs are lower.
But European Commission sought to allay fears of protectionism. "In fact, EU said it has discussed specific issues – namely the automotive sector and how it is possible to support the automobile sector by not breaking the rules of the internal market and not seeing national measures that could be detrimental to other countries".
There were also calls to make it easier for East European countries to introduce Europe’s single currency, the euro. But Czech Republic, which holds the rotating EU presidency, disagreed.
The meeting on Sunday the 1st March was the latest in a series of discussions among European nations before the leaders of the "Group of 20" major industrialized nations meet in London next month.