Do Asians See a Role in Solving the Eurozone Crisis?
The Eurozone’s debt crisis has spurred talk about a possible role for BRIC countries to lend a helping hand through increased financing of the International Monetary Fund (IMF). While discussions are still under way over whether the IMF will even step into the euro crisis, rising powers such as China and Brazil continue to express interest. G20 finance ministers and central bankers met in Paris over the weekend and said they expected the October 23 European Union summit to “decisively address the current challenges through a comprehensive plan“. Today’s blog post highlights the views in China, India, and Russia on this issue:
The mixed views in China indicate an interest to help the Eurozone in such a way that is both economically practical and politically beneficial to China-EU relations.
- Several op-eds in the People’s Daily highlight China’s shouldering of responsibility in global finance. They point to China’s purchase of European debt securities, expressed confidence in the Eurozone, and continuing trade and investment relations with the EU.
- Nevertheless, some voices emphasized that “China has to be cautious while expanding in Europe,” and consider “many factors including investment return, security, risk and national interests.”
- Ding Gang, a senior reporter with the People’s Daily, was more blunt about what China should expect in return: It is only “the most basic fair treatment” to ask that the EU recognize China’s market economy status and end the arms sale ban on China.
- Specific policy recommendations came from a recently organized academic forum at Tongji University. It was reported that Qiao Yide, secretary-general of the Shanghai Development Research Foundation, recommended the following: 1) purchase bonds from multilateral institutions (the European Financial Stability Facility) instead of national bonds; 2) encourage Chinese businesses to expand in Europe; and 3) increase the euro’s weight in the currency basket of the Chinese yuan.
- A Global Times op-ed commented on the geopolitical opportunity of the crisis. Liu Zongyi, research fellow at the Shanghai Institutes for International Studies, sounded optimistic aboutChina-EU cooperation that would help the two economies avoid possible financial shock from “the irresponsible monetary policy of the US” and the threat of “the falling value of the US dollar.”
Not much is being said in India about any role that the country could play in the EU financial crisis. This is not entirely surprising given India’s general reluctance to be out in front on controversial international issues. Finance Minister Pranab Mukherjee echoed the IMF’s general position that “the issue of sovereign solvency ought to be resolved by the Europeans themselves.”
In contrast, an op-ed in The Economic Times last month argued that, compared to Brazil’s pro-activeness, India is missing out on a diplomatic opportunity to assert itself in the politics of global finance.
Prime Minister Vladimir Putin has been particularly vocal in expressing his views on the European debt crisis, calling for an increased BRIC role in international financial institutions:
- In an interview with Chinese state broadcaster CCTV, Putin emphasized that the BRIC group should lead the reform of international financial systems. “I think it’s time to talk about reforming existing institutions, and first of all I mean global financial institutions, such as the International Monetary Fund and World Bank. And here we agree that the role of the BRICS countries in those organizations must be enhanced, given the growing importance of our countries’ economies.” At the same time, Putin noted that “Europe’s heavyweights have enough resources to solve the problem,” and he did not foresee a large role for the BRICS in the euro crisis.
- Echoing the PM’s statements, Deputy Finance Minister Sergei Storchak stated that Russia is “ready to help other economies that need our resources,” but that this should be done through the IMF and other institutions, since “larger European countries cannot be supported solely through the framework of bilateral agreements.”
- Noting that “the process of creating post-crisis models for global development is progressing with difficulties,” Putin has called for the creation of a “Eurasian Union” of former Soviet countries that could serve as a bridge between Europe and Asia while strengthening the global economy.
- Regardless of the outcome of the crisis, Putin stated on Monday that Russia has a “high margin of safety to be ready for any turn of events in the global economy.”