Brussels  - The European Union should set up a fund of up to 190 billion euros (240 billion dollars) to keep the crisis-hit countries of Central and Eastern Europe from collapse, Hungary said ahead of an EU summit in Brussels on Sunday.

"Despite cautious economic policies, Eastern Europe is being affected disproportionately by the global financial and economic crisis ... Failure to react could cause a second round of systemic meltdowns that would mainly hit eurozone economies," a paper drawn up by the Hungarian government said.

In response, the EU should set up a special European Stabilization and Integration Programme to prop up the region's economies, the paper, which is to be presented to EU leaders at the summit, said.

The former-Communist states of Central and Eastern Europe have seen the spectacular economic growth of recent years slammed into reverse by the current global crisis.

Latvia and Hungary have already been forced to take out massive international loans to shore up their currencies, while even the relatively stable Poland, Slovakia and the Czech Republic have seen growth forecasts dwindle close to zero.

The region's re-financing needs in 2009 could total around 300 billion euros, some 30 per cent of the region's economic output, the Hungarian paper said.

"Partial failure to refinance could lead to massive contractions in economic activity and large-scale defaults," the paper said.

The EU should therefore set up an emergency fund of up to 60 billion euros to give troubled member states emergency liquidity, offer up to 45 billion euros to prop up restructured banks, and spend 35 billion euros on trade financing and 50 billion on support to local businesses, the paper says.

Hungary has won notoriety in the EU as the first country to need an international bailout. Its government ran a deficit of larger than the EU's permitted 3 per cent of gross domestic product every year since it joined the bloc in 2004. dpa