China’s premier says impact of crisis worsening
BEIJING — Expressing alarm at Europe’s debt problems, Chinese Premier Wen Jiabao called on Greece, Spain and Italy to embrace budget cuts and get their finances in order after meeting Aug. 30 with visiting German Chancellor Angela Merkel.
Wen said Beijing is willing to keep buying European bonds but gave no sign Beijing will bail out the euro zone.
Merkel was in Beijing for talks aimed at boosting trade and allaying Chinese fears about Europe’s heavy government debts. China has a stake in a resolution because Europe is its biggest export market and Beijing holds billions of dollars in European bonds.
“The European debt crisis has continued to worsen, giving rise to serious concerns in the international community. Frankly speaking, I am also worried,” Wen told reporters. He cited uncertainty over whether Greece leaves the euro zone and whether Italy and Spain will take “comprehensive rescue measures,” a reference to spending cuts and tax increases to balance their budgets.
“Resolving these two problems rests with whether Greece, Spain, Italy and other countries have the determination for reform,” the premier said. “Resolving the European debt problem requires fiscal tightening and finding balance within individual economies.”
Wen’s comments were unusually pointed for China, which says governments should not interfere in each other’s affairs. But the country’s leaders are increasingly worried about the safety of their European debt holdings and European economies where Chinese companies are expanding.
Wen said Beijing was willing to buy European bonds so long as it could evaluate the risks and to help the European Union, International Monetary Fund and European Central Bank – the so-called troika – support indebted eurozone countries “in overcoming hardships.”
Wen made a similar pledge of possible Chinese aid to European bailout funds during Merkel’s last visit to Beijing in February but it is unclear what the communist government has done.
The European Financial Stability Fund, set up to lend to troubled governments, says China and other Asian investors have bought 40% of its bonds but has released no other details.
Merkel told reporters that while the crisis is not over, countries such as Italy and Greece were “on an intensive road of reforms. I am convinced that this will bear fruit.”
Greek politicians agreed this week on an austerity package demanded by creditors but were negotiating details. Inspectors from the troika are due in Athens next month for a review, on which hinges a rescue loan installment of C31 billion.
“I want Greece to remain part of the euro zone,” Merkel said. “I have at the same time indicated that credibility is very important in the euro zone. Therefore we expect the program to be implemented.”
Ahead of Merkel’s visit, German officials told reporters Berlin wanted to reassure Beijing that European debt is a “safe and good investment.”