Q&A: What can the EU do to help E.Europe?

(Reuters) - European Union leaders meeting in Brussels on Friday discussed action on the financial crisis, including concerns that some eastern European countries may need help.

A summit draft showed the bloc was ready to help European countries in trouble on a case-by-case basis and to keep under review the ceiling of a 25-billion-euro ($33.7-billion) EU crisis fund which has already been used by Latvia and Hungary.

Following are possible measures the EU could take:

WHAT CAN THE EU DO TO HELP STATES IN EU BUT NOT EURO ZONE

* The EU may grant further loans to its members outside the euro from the so-called medium-term financial assistance facility, designed under EU law for countries "seriously threatened with difficulties in their balance of current payments or capital movements."

Diplomats said EU leaders had agreed to double the fund to 50 billion euros ($68.47 billion), although the measure still needs to be discussed by the bloc's finance ministers.

Hungary has received 6.5 billion euros from the fund and Latvia 3.1 billion as part of wider packages backed by the International Monetary Fund. Romania wants to tap the fund.

The fund is not designed to rescue banks or help the real economy and any change in its objectives would have to be unanimously approved by the EU's 27 member states.

WHAT OTHER EU CASH COULD BE USED?

* The European Commission has pushed forward the release of EU regional aid funds for east European members, which should make several extra billion euros easily available in 2009-10.

The EU has earmarked some 160 billion euros of such funds for those countries in 2007-2013, with most of them to be released gradually, project by project.

The funds are part of the EU budget, worth some 125 billion annually, which is fixed well in advance.

EBRD, EIB, WORLD BANK

* The World Bank, the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB) have launched a joint program to lend up to 24.5 billion euros in the region.

The two-year plan would provide quick, large-scale financing to banks and ensure that companies, especially small- and medium-sized enterprises, get access to capital.

WHAT OTHER POSSIBILITIES ARE THERE?

* Other aid, be it loans, cash injections or standby facilities, would have to be extended by individual EU member states or groups of them.

This would be done outside the EU legal framework, although regular EU meetings could be used to negotiate the aid. Large, rich EU members are likely to be more keen to help fellow EU members than other countries, to preserve the political and economic coherence of the 27-nation bloc.

WHAT IF A SUBSIDIARY OF A WESTERN EUROPEAN BANK WAS

THREATENED WITH COLLAPSE IN ONE OF THE NON-EURO ZONE EU MEMBERS?

* There is no fixed EU procedure.

As was the case with banking groups Fortis or Dexia, there is likely to be an emergency meeting of representatives of governments of the host country and the home country of the bank as well as supervisory authorities and shareholders to hammer out a deal on who pays what to keep the subsidiary afloat.

Government aid for individual banks would, however, have to be in line with the EU's competition rules.

Austria and Hungary are lobbying have lobbied for a massive aid fund for central and east European banks, but have so far gained little support.

(Writing by Marcin Grajewski)