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EU bailout fund chief holds talks in China

28 october 2011, 13:12
0
Klaus Regling. ©AFP/Peter PARKS
Klaus Regling. ©AFP/Peter PARKS
The head of the eurozone bailout fund held talks in Beijing on Friday as Europe tries to persuade China and other top emerging economies to help rescue it from its crippling debt crisis, AFP reports.

Klaus Regling, chief executive of the European Financial Stability Facility (EFSF), is in China after European leaders reached a last-ditch deal to tackle the crisis, which they hope will boost market confidence in struggling eurozone economies.

The plan, announced by French President Nicolas Sarkozy after 10 hours of summit talks in Brussels on Thursday, includes quadrupling the firepower of the EFSF to one trillion euros ($1.4 trillion).

Neither the EU nor Chinese authorities gave details of who Regling would meet in Beijing, but leaders at Thursday's summit discussed asking China and other emerging economies to help, possibly by investing in the rescue fund.

Hours after the deal was struck, Sarkozy telephoned China's President Hu Jintao, later giving a television interview in which he defended the proposal, details of which remain unclear.

"If the Chinese, who have 60 percent of global reserves, decide to invest in the euro instead of the dollar, why refuse?" said the French president, adding: "Our independence will in no way be put into question by this."

China, the world's second-largest economy, has invested significant sums in European bonds and has repeatedly called on Europe to address its debt crisis, saying a failure to act risks dragging the world back into recession.

Chinese state media have reported that the country has agreed to contribute to the EFSF, but there has been no official confirmation of this and Beijing has given little indication of how it might be prepared to help.

On Thursday, Beijing cautiously welcomed the European deal and reiterated China's "faith in the EU and the eurozone economy".

But bailing out developed countries would be a hard sell for the Communist leaders of a country where soaring housing and food costs are hurting millions of poor households and many small exporters are struggling to pay their bills.

"Many can't understand why China should extend a helping hand to Europe, since its own city of Wenzhou is in a funding crisis," the Global Times daily said in an editorial on Friday, referring to a credit crunch that has hit businesses in the eastern city.

China's state Xinhua news agency said Thursday Europe needed to take responsibility for the crisis, and not rely on "good Samaritans" to rescue the continent.

There are several possible ways in which China could help the eurozone.

It could invest directly in the EFSF; put money into a special vehicle for distressed European debt to be administered by the International Monetary Fund; invest directly in banks, or simply buy eurozone sovereign debt.

But IHS Global Insight analyst Ren Xianfang said China was likely to attach a number of conditions to any investment, such as greater market access in Europe and silence on the strength of the yuan, which critics argue is undervalued.

"China wants to get what it wants if it is to play a role in this," Ren told AFP.

Regling is scheduled to hold a media briefing in the Chinese capital on Friday afternoon.

He will travel to Japan at the weekend, European Union delegations in Beijing and Tokyo have said.

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