Categorized | World

Europe looks to China to bail itself out

Posted on 29 October 2011

This is a summary of the original article here.


The head of Europe’s rescue fund is asking China to invest in the facility by saying investors may be protected against a fifth of initial losses and that bonds could eventually be sold in yuan if Beijing desires.

Klaus Regling was in China on Saturday to persuade Beijing to stump up money and help the euro zone beat its two-year-old debt crisis. Regling did not say whether China had asked for that degree of protection and declined to comment on his meetings in Beijing. But he said he expected to submit a proposal on how to scale up the 440-billion-euro ($623.7 billion) EFSF rescue fund by November.

Expanding the EFSF to 1 trillion euros is key to the euro zone’s latest anti-crisis plan, put together at a Eurozone summit this week. Details on how this would be done have yet to be finalized and European leaders are under pressure to show the plan would work.

He’s not the only one looking to the Middle Kingdom (soon to be known as the country at the centre of everything) for moolah. Immediately after the eurozone decided to save Greece, French President Nicolas Sarkozy got on the phone to China to seek financial help, saying Beijing had “a major role to play.”

Some analysts agree that China may stand to gain far more than it would lose if it provides support for Europe, not least in protecting its global trade. But it may drive a hard bargain to part with some of its $3.2 trillion foreign exchange reserves, the world’s largest.

Beijing is nonetheless cautious. Although China has expressed confidence that Europe can survive its crisis, it has made no public offer to buy more European government debt.

Incidentally, the majority of Greeks think their 130 billion euro plan sucks because it harms national sovereignty.

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