China urges more "decisive action" on euro crisis
BEIJING (Reuters) - China said the euro zone finance ministers' decision to lend Spain up to 100 billion euros ($125 billion) to shore up its teetering banks was a welcome short-term fix, but urged the bloc to take more decisive action to safeguard longer term stability.
A bailout for Spain's banks, beset by bad debts since a property bubble burst, would make it the fourth country to seek assistance since Europe's debt crisis began.
Vice Finance Minister Zhu Guangyao told reporters on Monday that China welcomed what he called the European Union's decisiveness, but added that more would need to be done.
"We hope these measures will be helpful in containing the crisis," Zhu told a news conference. "This can be of great use in controlling short-term risk. But, in the interests of mid- or long-term stability, we hope the euro zone will improve consensus and take more decisive action."
With the rescue of Greece, Ireland, Portugal and now Spain, the EU and IMF have now committed around 500 billion euros to finance European bailouts.
"Problems that can be solved with money are not problems," the People's Daily, the mouthpiece of the ruling Communist Party, scolded on Monday. The commentary was published under the pen name "Zhong Sheng", or "Voice of China", which is often used to give the paper's view on foreign policy issues.
"Fundamentally, Europe is facing a problem of systemic integration and survival. Overcoming the crisis depends on whether the debt-ridden countries can decide on painful reforms and rouse their spirits to tackle them."
The deputy head of China's central bank, Zhu Jun, told reporters on Monday that the euro zone has the resources to solve its own problems.
But she also reiterated President Hu Jintao's earlier statement that China would "not be absent" from plans to enhance funds for the International Monetary Fund.
Euro zone policymakers are eager to shore up Spain's position before a June 17 election in Greece that could push Athens closer to a euro zone exit and unleash a wave of contagion.
Vice Finance Minister Zhu Guangyao said that China hoped Greece would stay in the euro, and the euro would stay intact, citing European commitments in that regard.
"China has a very cautious tradition in macro policy. Therefore, we have a saying: 'Plan for the best and prepare for the worst'," he said, in response to a question on whether China has contingency plans for a eurozone break-up.
China's $410 billion sovereign wealth fund, China Investment Corp, has cut its stock and bond investments in Europe as it sees rising risks of a euro zone breakup, the fund's chairman told the Wall Street Journal last week.
Lou Jiwei was quoted as saying that China was also unlikely to buy common euro zone bonds, should they eventually be sold as part of a resolution of the European debt crisis, as "the risk is too big, and the return is too low".
Statements from China's political leaders have previously been supportive of efforts by Europe to resolve a crisis now more than two years old, though soothing words have stopped short of offering commitments of injections of cash to help shore up banks and sovereign borrowers.