EU's pleas for aid are unhelpful: experts
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China Daily, January 20, 2012
The European Union's decision to mobilize external resources from countries such as China and Brazil is unhelpful, and indicates the internal political weakness of the monetary union, said Paul De Grauwe, a professor of economics at the Catholic University of Leuven in Belgium.
"I always think this is a silly idea. You have a central bank and you have financial means to solve your own problems. For all kinds reasons, they don't want to use these means. They ask China and Brazil to help them out. This doesn't make sense," said De Grauwe.
"I don't think it is in the interests of China to do so," he added.
To save the euro, De Grauwe said that the EU needs to have institutions that are willing to use unlimited resources. "I don't think China will announce that it will use unlimited resources to save the euro."
De Grauwe said the fact that European politicians have asked external forces for help indicates an internal weakness. "They have lost confidence and are too paralyzed to unite their thoughts," he said.
Zhang Xiaojing, an economist with the Chinese Academy of Social Sciences, said the European Union has the collective fiscal capability to solve the problem. "However, this is a redistribution problem and the core is whether the rich countries are willing to contribute for those difficult member states," said Zhang.
The politicians in the fiscally solvent countries are under electoral pressure, said Zhang. "So the politicians choose to garner help from external forces to reduce the difficulties of solving the debt crisis."
De Grauwe's colleague, professor Sylvain Plasschaert, said: "It was a little humiliating for the EU to request that China purchase governmental bonds of member countries."
But he said if China, as well as the world, has an interest in avoiding an implosion of the euro, the country may well be inspired to buy some euro-government bonds with a view to diversifying its enormous foreign-exchange reserves.
Duncan Freeman, a senior researcher with the Brussels Institute of Contemporary China Studies, said neither China nor the other emerging economies can solve the current problems in the EU. "They may be able to provide some support, but the real solution can only come from within Europe," Freeman said.
However, David Fouquet, director of the Brussels-based Europe-Asia Research Network, said the current European difficulty is really a global systemic crisis that affects all regions, states and the international order.
"Everyone has a role to play, and isolated, fragmentary or uncoordinated efforts could be inadequate, inappropriate or counter-productive - the challenge is to identify positive policies and roles for all the stakeholders," Fouquet said.
He said it is difficult to reach a consensus on the solution to the crisis. "But the longer the global community fails, the more victims it will affect."
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