China backs Europe to sort out debt mess

2011-10-31 19:00

Vienna - China remains confident Europe can solve its crippling debt crisis even though it continues to balk at requests for it to use its financial firepower.

President Hu Jintao told reporters on Monday his country is closely following developments in Europe as the 17 countries that use the euro grapple with a debt crisis that has seen three countries bailed out and threatening to engulf Italy, the eurozone's third largest economy.

"We are convinced that Europe has the wisdom and the competence to conquer its momentary difficulties," he said during an official visit to Austria.

Europe is closely watching comments by Hu and other Chinese officials in the hope the country will use some of its huge cash reserves to help prevent the region's debt crisis from spilling over into increasingly shaky economies like Italy and Spain.

Beijing so far has promised to help only by continuing business as usual, trading with Europe and stockpiling some of China's multibillion-dollar trade surpluses in the safest European government bonds.

Eurozone leaders last week presented the broad outlines of a new anti-crisis strategy. At the centre of this strategy is an expansion of the eurozone's bailout fund, the European Financial Stability Facility.

Since the currency union's finances are already stretched, it wants non-European investors to help fund a special investment vehicle that would act alongside the EFSF.

Although many details of that plan have still to be agreed, this investment vehicle could help the EFSF buy up bonds from struggling countries like Italy and Spain or support bank recapitalisations in poorer eurozone countries.

Getting more resources behind Europe's main anti-crisis weapon is particularly important if market pressures continue to rise on Italy.

On Friday, Rome had to pay record interest rates at a bond auction, indicating that it may soon have to request help from the eurozone to keep its funding costs in check.

No signs of more direct Chinese plans to help have emerged during Hu's visit, which started Sunday and ends in two days, when he flies to the G20 summit in Nice, France for talks expected to focus on the eurozone's crisis.

Instead, Hu suggested on Monday that China remained content to let European Union leaders work on a solution.

Hu, who did not take questions, said he believes that the path to a global upswing lies on greater cooperation among the world's leading economies.

Hu has been courted by major EU countries as the financial crisis unfolds.

He and French President Nicolas Sarkozy talked on Thursday by phone and pledged to co-operate to revive global growth, while the chief executive of the EU's bailout fund visited Beijing on Friday to talk to potential investors.

- AP
Read more on:    hu jintao  |  nicolas sarkozy  |  france  |  china  |  economy
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