EU economic ministers meet to draw up financial rescue plan

EU ministers to draw up financial defense plan

BRUSSELS — The chair of a meeting of European Union finance ministers promised on Sunday to do “whatever is necessary” to set up a rescue mechanism for the embattled euro before markets open but did not disclose any details of what’s in store.

Spanish Finance Minister Elena Salgado said the ministers would use an emergency meeting to work out plans to improve the stability of the euro after the currency was rocked over the past weeks by the Greek financial meltdown.

“We are going to defend the euro,” said Salgado, who presided over the ministerial meeting. “We have to give more stability to our currency … We will do whatever is necessary” to reach agreement among the 27 ministers.

But so far, the finance ministers have been tightlipped what the measures will be.

They could involve balance of payment support that has already been available to some EU nations outside of the eurozone. There is also talk about specific loan guarantees, which countries like Britain could well oppose since it could be seen as a bailout fund.

Specific measures will have to be approved by the time markets open Monday because vague promises have been unable to calm markets over the past weeks.

“We need to make progress today because in the night, when the markets are opening, we cannot afford disappointments,” said Swedish Finance Minister Anders Borg.

“We now see herd behaviors in the markets that are really pack behaviors, wolf pack behaviors,” he said. If unchecked, Borg said, “they will tear the weaker countries apart. So it is very important that we now make progress.”

Some eurozone nations blamed the fragile governments and a lack of European cooperation for the crisis.

“I’m against putting all the blame on speculation,” said Austrian Finance Minister Josef Proell. “Speculation is only successful against countries that have mismanaged their finances for years.”

Underscoring the urgency, the European Commission was working out the details of the deal even before the meeting started.

“This is an important moment for both the Europeans and the others,” said French Finance Minister Christine Lagarde.

Compounding the Greek financial crisis, attention has centered on fragile financial systems of countries like Spain and Portugal, which in turn could drag the whole of the euro-zone further down.

“We have to take decisions that will restore the stability of the euro, for the eurozone and we have to work on the mechanism which will be comprehensive and efficient to restore stability,” said Lagarde.

Some European leaders are trying to persuade the staunchly independent European Central Bank to get involved.

Early Saturday, the eurozone leaders gave final approval for an euro80 billion ($100 billion) rescue package of loans to Greece for the next three years to keep it from imploding. In Washington on Sunday, the board of the International Monetary Fund opened a meeting to vote on its euro30 billion ($40 billion) share of the bailout for Greece.

Spain and Portugal are beginning to show the same signs of trouble that Greece was three months ago, with borrowing costs increasing, talk of speculative attacks and increasing concern among European partners that some form of help could be required.

Financial markets have continued to sell off the euro and Greek bonds even as EU leaders have insisted for days that the Greek financial implosion is a unique combination of bad management, free spending and statistical cheating that doesn’t apply to other euro-zone nations.

Many economists think Greece will eventually default anyway, which could deal a sharp blow to the euro and lead to sharply higher borrowing costs for other indebted countries in Europe.

Default, or market contagion to other countries could lead to panic, intimidating consumers from spending and making banks fearful to lend money to businesses and consumers.