Will China Help Put Europe’s House In Order?

By Nawab Khan

As the world anxiously watches and waits to see if the European Union would come to grips with its precarious debt and bank crises, Europeans are already sending signals to get foreign support to overcome them.

Only hours after EU leaders at the Brussels summit Thursday morning agreed to forgive fifty percent or 100 billion euro of Greece’s debt, to boost capital reserves for banks and to expand the bail out fund, European Financial Stability Facility, EFSF, French President Nicolas Sarkozy spoke on the phone with his Chinese counterpart Hu Jintao to seek possible Chinese contribution to the ESF.

“The Chinese, who have 60 percent of the world’s reserves, decide to invest in the euro instead of the dollar, why refuse?” Sarkozy said in a television interview on Thursday.

Klaus Regling, EFSF chief executive, on Friday visited Beijing where he said that 40 percent of the bonds issued by EFSF have been bought by Asian investors.

“We all know China has a particular need to invest surpluses,” he said, adding that China is “interested in finding attractive, solid and safe investment opportunities.” China is reported to have foreign exchange reserves of over USD three trillion.

However, the European press appeared to be sceptical or even critical of an eventual Chinese financial assistance to Europe.

“Counting on China to strengthen the EFSF, EU leaders should answer a basic question”, wrote the Polish paper Gazeta Wyborcza.

“If they take China’s billions to save Greece or Italy, will they still have the courage to condemn the breaching of human rights in Tibet or Sinkiang?,” it questioned.

“The other idea of creating a second fund, a “special vehicle” open to capital from China and emerging economies, has come under broad criticism, and not without reason,” stated the French newspaper Les Echos.

“Should it be put directly into the hands of China? Would it not hamper any move against the yuan’s value or, more broadly, any move to denounce this or that Chinese policy, ” commented Les Echos.

“The eurozone has now publicly admitted its inability to cope by itself,” wrote the Belgian daily La Libre Belgique.

“The S.O.S. sent out by Europe to the emerging powers is a development that would have been unthinkable a few years back. It reflects the changes in the power relations between major world powers, ” it noted.

Spanish paper Expansion concluded that “some analysts are worried that this money would be coming from countries like China and Russia which could be looking for political gain.”

Looking from the Chinese perspective, the Global Times published in Beijing wrote that “some Europeans hold that Europe hasn’t dropped to the level to beg China just yet. The mainstream mentality there seemingly thinks the EU should prompt China to provide funding, while it shouldn’t give China any other benefits.”

“If the EU really wants China’s funding, they should consider further opening their markets to China, as well as admitting China’s position as a market economy. If they think such “deals” are not worth it, China won’t force them to proceed,” it added.

Chinese Premier Wen Jiabao put it more bluntly. He said recently that while China was willing to help, developed nations also needed to put “their own houses in order.”