The European Union and the International Monetary Fund pledged nearly $1 trillion Monday to defend the embattled euro, hoping to repel relentless attacks on the weakest of Europe's debt-laden nations and prevent the common currency from disintegrating. Central banks around the world joined the coordinated effort to prop up the euro and prevent Europe's debt crisis from derailing the global economic recovery. The US Federal Reserve reopened a currency “swap” program to ship billions of US dollars overseas in a bid to pump more short-term cash into the financial system and ensure banks have the dollars they need. Separately, the ECB jumped into the bond market, saying it is ready to buy debt from the eurozone - EU nations that use the euro - to shore up liquidity in “dysfunctional” markets. Many investors, rattled for weeks by the prospect Greece would default on its mountain of debt, heaved with relief. There was cautious endorsement from analysts who still feared the measures may not be enough to save the common currency, which was adopted by many of the EU's member states in 1999. “It buys time. We don't know if it will be enough. They're trying to give the impression that they're still united. They've bought some breathing space but that's all,” said Song Seng Wun, an economist with CIMB-GK Research in Singapore. “This perhaps just postpones the inevitable, the euro may have to ultimately give way, that's the worst case scenario.” Under the three-year plan, the European Commission - the EU's governing body - will make 60 billion euros ($75 billion) available while countries from the 16-nation euro zone would promise backing for 440 billion euros ($570 billion). The IMF would contribute an additional sum of at least half of the EU's total contribution, or 250 billion euros. “We shall defend the euro whatever it takes,” EU Commissioner Olli Rehn said after an 11 hour-meeting of EU finance ministers that capped a hectic week of chaotic sparring between panicked governments and aggressive markets. Officials hope the massive sums will deter currency speculators from betting on a euro collapse after political posturing and soothing words failed to convince investors that Greece's financial implosion could be contained. Markets had battered the euro and Greek government bonds even as EU leaders insisted for days that Greece's problems were a unique combination of bad management, free spending and statistical cheating that doesn't apply to other euro-zone nations. Market jitters also partly contributed to a nearly 1,000-point drop in the Dow Jones industrials last Thursday. The Securities and Exchange Commission is meeting with heads of exchanges Monday to discuss how conflicting trading rules may have exacerbated the historic stock market plunge. In the end, even longtime skeptic Germany realized Europe had to show the money after financial attacks on Greece's debt seemed poised to spread to other weak European nations such as Portugal and Spain. Fear of default led to investors demanding high interest rates that Greece could not pay, forcing it to seek a bailout. Many feared market skepticism would make Portugal and Spain pay more and more to borrow, worsening their plight. “We now see herd behaviors in the markets that are really pack behaviors, wolf pack behaviors,” Swedish Finance Minister Anders Borg said. “If unchecked, “they will tear the weaker countries apart. So it is very important that we now make progress.” Spain and Portugal have committed to “take significant additional consolidation measures in 2010 and 2011,” a statement from EU finance ministers said. The two countries will present them to EU finance ministers at their meeting on May 18. “We are facing such exceptional circumstances today and the mechanism will stay in place as long as needed.
