EU ready to examine faster euro memberships

By Ilona Wissenbach and Marcin Grajewski

BRUSSELS (Reuters) - European Union leaders rejected a mass bail-out of central and eastern European countries on Sunday, but held out the prospect of bringing them under the protection of the euro zone more quickly.

At a summit called to bridge differences over how to handle the global economic crisis, leaders made a new commitment to the EU's single market -- a response to fears that any protectionist moves to prop up national industries would undermine EU unity.

In a bid to unclog credit flow to the withering economy, the leaders backed European Commission guidelines issued last week on the treatment of toxic assets in banks, and will formally endorse the recommendations in two weeks.

They also supported a call by a study group led by former French central bank governor Jacques de Larosiere to create two bodies to coordinate oversight of financial institutions across Europe to avoid a repeat of the credit crunch.

Hungary had led calls for a 180-billion-euro ($228 billion) aid package to rescue east European economies whose currencies have been battered in the economic downturn, and called for the two-year preparatory phase for euro membership to be shortened.

"We should not allow a new 'Iron Curtain' to ... divide Europe into two parts," Hungarian Prime Minister Ferenc Gyurcsany said, warning of the growing divisions between rich and poor countries because of the economic crisis.

NO CHANGE TO EURO CRITERIA

German Chancellor Angela Merkel said there could be no change to EU treaty rules requiring applicants to get their economies into shape for the single currency zone, but indicated the process could be accelerated.

All applicant countries must demonstrate their currency's stability by putting it in the Exchange Rate Mechanism 2 currency grid for two years before admission to the euro.

"There are requests to enter ERM 2 faster," Merkel said. "We can have a look at that."

French President Nicolas Sarkozy also backed away from a quick change to existing rules, but said: "In the future, when the crisis is over, should we look and see what we have learnt from the crisis ... to see if we should integrate new criteria."

Hungary, Poland, Bulgaria, Romania, the Czech Republic and the three Baltic states are all would-be euro zone members.

Gyurcsany said it was time to unify Europe, as happened when communist rule ended in eastern Europe two decades ago.

"At the beginning of the 90s, we reunified Europe. Now it is another challenge -- whether we can unify Europe in terms of financing and its economy," he said.

Despite his remarks, the summit agreed merely to look at helping any countries in difficulty on a case-by-case basis, rejecting a regional approach because of the differing situations of the individual economies.