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European Union leaders agreed to double a credit line for countries in financial distress, trying to shore up ex-communist economies hit by the worst slump in 60 years.

The EU will increase to 50 billion euros ($68 billion) a limit on emergency lending to 11 EU countries not using the euro, eight of which are in eastern Europe. Hungary has already drawn 6.5 billion euros and Latvia 3.1 billion euros. Leaders also agreed to boost funds to the International Monetary Fund by 75 billion euros

“We have matched our words with action,” European Commission President Jose Barroso told reporters after an EU summit in Brussels today. “Our message is one of confidence and solidarity.”

The offer by the richer western European countries calmed tensions triggered by a March 1 veto of a broad-based bailout for eastern Europe, which sent stock markets in the region to the lowest level in 5 1/2 years.

After spearheading opposition to an eastern rescue fund at the March 1 summit, German Chancellor Angela Merkel consented to lift the aid limit today as the deepening recession hammers eastern European finances.

The borrowing facility wouldn’t be available to countries using the euro such as Spain, which is reeling from a downgrade in its credit rating by Standard & Poor’s in January.

Romania last week became the third eastern country to request aid, with Prime Minister Emil Boc saying yesterday that the country may need 20 billion euros from the EU and IMF.

Credit Line

The credit line authorizes the European Commission to sell bonds to finance loans to EU countries outside the euro region that run into balance-of-payments difficulties. It was raised to 25 billion euros from 12 billion euros in December.

The leaders today left final decisions on implementing the increased aid ceiling to the bloc’s finance ministers.

The pledges came as EU leaders defended efforts to counter the economic crisis, rejecting criticism that they haven’t done enough. The economy of the 16-nation euro region will shrink 3.2 percent in 2009, the IMF said yesterday, worse than the 2 percent slump it forecast in January.

Goldman Sachs Group Inc us fast cash. yesterday urged bolder European action, saying governments should inject 1 trillion euros into the economy this year and next and accelerate their cleansing of banks’ toxic assets.

Along with the bloc’s increased in funding for the IMF, leaders announced spending of 5 billion euros on energy and telecommunications projects by the end of 2010 as part of a stimulus plan to combat the recession.

Eastern Loans

Strained by loans of $55 billion in the past six months to countries such as Hungary, Ukraine and Pakistan, the IMF had lobbied for a doubling of its pool of bailout funds to $500 billion.

The IMF contributions will come from individual EU governments and the size remains to be decided, possibly by the time Group of 20 leaders meet in London on April 2.

Merkel cleared the way for a separate deal on a 5 billion- euro package of energy and telecommunications projects, the final part of an EU stimulus plan to combat the recession.

Germany backed the EU-funded package as long as “substantial parts” of the projects get off the ground by the money is spent by the end of 2010, Merkel said.

The subsidies will go for energy and telecommunications networks, potentially including the Nabucco pipeline project to import natural gas from the Caspian Sea.

Deficit Balloons

The sum is part of the 30 billion euros from the EU’s central budgets that will be used to fight the recession. Steps by national governments will bring total EU spending to more than 400 billion euros.

The emergency spending will balloon the EU-wide deficit to 4.4 percent of GDP in 2009 from 2 percent last year, the EU forecasts. Under German and Dutch pressure, the leaders pledged to refocus on fiscal rectitude once the economy gets back on track.

Governments should return “to positions consistent with sustainable public finances as soon as possible,” according to a draft communiqué to be issued later today. The text set no deadline for erasing deficits.

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