By Anisimov Sergey and Frolova Inessa
The state of European economy is triggering more and more concern as experts express fears that the European stock crisis might spill over to become a global problem. For this reason, governments from all corners of the globe rushed to the Eurozone’s rescue.
EU finance ministers gathered in Wroclaw on Friday to discuss the possibility of reforms in the Eurozone and assistance plans for Greece. Secretary of the Treasury Timothy Geithner attended the meeting to pass President Obama’s message warning that the volatile Eurozone poses a threat to the global economy.
Geithner urged EU ministers to adopt the American model of overcoming the crisis and exert every effort to cement the unity of the Eurozone. Roman Andreev of the Financial Standard Bank, comments.
“Mr.Geithner tried to persuade the EU as a whole and Greece in particular to take urgent steps to prevent Greece from leaving the Eurozone. Neither the EU, nor the US, will benefit from this, he said, as the American economy is linked to the economy of the Eurozone. But the EU has always been slow at decision-making, and even a visit by such a big figure on the US political scene cannot make it faster.”
Besides, there is no agreement on the issue within Europe proper. Austria sees Greece’s default as the best way out of the crisis. In contrast, France is ready to sacrifice everything to prevent it. French Finance Minister Francois Baroin has said that the country’s banking sector is prepared to take parting in changing Greece’s overdue bonds for long-term securities.
European Commission President Jose Manuel Barroso told European Parliament this week that securities issue options to guarantee long-term stability would be submitted in the near future. Germany, however, is against issuing Eurobonds. Philipp Rosler, Federal Minister of Economics and Technology, had this to say.
“Mr.Barroso is not speaking on behalf of the German government. According to the recent ruling from the German Supreme Court, such limitless commitments cannot be undertaken without the approval of the German parliament. Germany excludes issuing Eurobonds.”
Germany insists that the Eurozone’s problem countries must carry out structural reforms. These countries are Greece, Ireland, Portugal, Spain and Italy, and they have already launched the reforms. This week, the parliament of Italy approved a plan to cut budget deficit and save more than 54 billion euro over the next two years at the expense of an increase in the retirement age, less government spending and changes in the taxation system. People in Italy responded with mass protest rallies.
But it looks like Italy is luckier than others. As he addressed the World Economic Forum in Dalian on Wednesday, Chinese Premier Wen Jiabao said that Beijing is ready to lend a helping hand to the Eurozone. Reports from Rome say that Beijing agreed to buy Italian public bonds. Even though China refrained from comment, Patrick Chovanek of Tsinghua University’s School of Economic and Management confirms the reports.
Further delay is hardly possible. According to a report by the EU’s economic and financial committee, the stock crisis spread to other countries and markets after the situation in the sovereign bond market worsened and the banks’ access to loans became more problematic this summer. George Soros warns that a new financial crisis will have far more serious consequences than the collapse of Lehman Brothers in September 2008.