The recent debt crisis in Central and Eastern Europe has split the continent, causing conflict between "Old" and "New" Europe. Will the financial crisis unify the continent or tear it apart?

Financial crisis splits Europe

Due to the close financial and economic ties between Europe and the United States, the financial crisis rapidly crossed the Atlantic Ocean and spread to Western Europe after it began in the United States. Since then, dealing with the economic crisis has been Western Europe's top priority. Big European countries such as Britain, France and Germany jointly took significant measures. Last October, the eurozone held its first summit meeting, issuing a bailout plan worth more than 1 trillion euros. EU leaders, including French President Nicolas Sarkozy, persuaded the United States to hold an anti-crisis summit in Washington D.C. in November, where leaders discussed international financial system reform.

TRY TO COORDINATE: French President Nicolas Sarkozy (center) shakes hands with Hungarian Prime Minister Ferenc Gyurcsany during an EU summit in Brussels on March 19 (WU WEI)

DECREASING INTEREST: President Jean-Claude Trichet announces at a press conference on March 5 that the European Central Bank's main interest rate would be lowered to a record 1.5 percent, in an effort to stimulate the eurozone economy (XINHUA/AFP)

Since Central and East European countries didn't hold many toxic assets, they were not affected much at the beginning of the financial crisis. While West European economies foundered, their Central and East European neighbors stood by and watched. They didn't participate in Western Europe's rescue efforts, either. By February, the global financial crisis had finally engulfed Central and Eastern Europe, especially debt-laden countries such as Poland and the Czech Republic. These countries couldn't stand by anymore, but had to join in the battle against the financial crisis.

The crisis has highlighted divisions between "Old" and "New" Europe, leading to speculation that a new economic iron curtain will descend between the two sides. But the financial crisis is only one reason behind their rifts.

Before the crisis, West European financial institutions basically controlled the financial sector in Central and Eastern Europe. In order to increase liquidity at home, they withdrew their capital from Central and East European countries last fall, triggering severe debt crises in the region. Meanwhile, some West European governments required domestic financial institutions receiving government bailout money to give loan priority to local citizens and enterprises, pressing these financial institutions to further withdraw capital from Central and Eastern Europe.

Growing trade protectionism in Western Europe has also caused a rift with Central and East European countries. West European governments have taken a series of protectionist measures in their own interests, ignoring the disadvantages they create for Central and Eastern Europe. In February, President Sarkozy called on French automakers not to use government aid to sustain their overseas operations, and suggested they relocate their production bases from Central and Eastern Europe. In addition, foreign employees from Central and East European countries, such as Poland and Romania, have been among the first to lose their jobs as West European economies continue to slide. All this has led the

already fragile economy in Central and Eastern Europe to further deteriorate.