Europe has asked China to help finance the eurozone debt crisis which?has left the EU with no option other than relying on the world’s second biggest economy to bankroll its rescue plan.
Critics of the EU view the current situation as one great example of how Western economies are tipping towards the East for their existence. The Eurozone leaders have asked China to grant huge amount of money to save EU from, what analysis called “The Great Collapse and end of the European dream”.
Klaus Regling,?chief executive of European Financial Stability Facility, recently made an emergency visit to Beijing to address Chinese investors.
China, on the other hand, feels it should first check ground realities and carry out some serious study before investing large amount of money into EU, its biggest trade partner.
Nicolas Sarkozy, French President and currently EU president, said he had spoken to Chinese President Hu Jintao on telephone and that President Hu Jintao congratulated us on finding a solution of two-year-old debt crisis that may have taken down the entire world economy.
Nicolas Sarkozy said he defends ”the idea of Chinese investment in Europe’s anti-contagion fund, donning the hat of Euro salesman.”
During an interview on Chinese National Television, President Hu Jintao said: “China has a major role to play. China must deploy more resources to stimulate the world economy. If they decide to invest in the euro rather than the dollar, why reject that? Why not accept that the Chinese place their trust in the eurozone?”
Eurozone leaders are under immense pressure and wish to finalise details with China for their proposed plan as soon as possible to save Europe from disaster and strengthen their rescue fund.
During their recent meeting Brussels, the EU leaders announced an agreement under which insurers and private banks have to bear 50 percent losses on their Greek debt shares in the recent proposal to cut Athens’ debt load to credible levels.
China with $US3.2 trillion in reserves, may contribute between $US50 billion and $US100bn to the European Union emergency fund after discussions with their investors.
Regling said that Europe has a little choice, as the EFSF stands at just over ?450billion, down ?200 billion and Italy, Spain and Portugal are on the verge of collapse and they will need somewhere in the region of ?2 Trillion minimum if those countries go the way of Greece.
“We all know China has a particular need to invest surpluses,” Regling told a Beijing news conference on Thursday, referring to the country’s US$3,2 trillion of foreign exchange reserves, the world’s biggest.
China holds vast amounts of US Debt and has in physical possession more dollars than the US itself.
Chinese finance minister, Zhu Guangyao said, “China must first see the details of a new European bailout fund before making any commitments. We of course must wait until its structure is extremely clear”.
“Moreover, this investment must be decided on after serious, technical discussions. Europeans should respect themselves and stop expecting charity from China,” Zhu added.
Mr. Francois Hollande, French Socialist leader who is expected to beat Nicolas Sarkozy in the next year’s presidential election said he is “deeply troubled” by the overtures to China. “I want to be sure about terms and conditions proposed by China before signing any deal,” he said in an interview earlier this week.
During a press briefing, he asked: ”Can anyone imagine that if China comes to the rescue of the eurozone, it will do so without anything in return? This, in reality, is a dependence which tantamount to a confession of weakness.”
World Bank President, Robert Zoellick, warned that China?s help wouldn?t be for free. ?I don?t think that China will just come in as a white knight and try to provide money just to bail out Europeans. There would be some serious conditions which the EU has to accept” he explained.
However, Regling rejected rumours that European Union leaders will be forced to provide concessions to China in return for investment. “I am not here to discuss concessions,” he said while adding: “China already buys EFSF bonds and gets no special considerations.”