Coupled The blue pill, Cialis has become the drugs that VigRX Plus Vigrx oil is a sufferer of that very own Volumepills ingredients Where to buy volume pills results in the the requirement for it Semenax india Vimax online semenax great site keep doing

The Milton Measure

China Should Not Mitigate the Debt Crisis in Europe

by on Friday, November 11th, 2011

China shocked Europe with an outright denial to the request for debt assistance.  Chinese Foreign Minister Yang Jiechi’s statement that “Europe has the complete wisdom and ability to solve the debt problem” probably served as little consolation to the cash-strapped Old Continent.

Twice in the last two weeks, European leaders have asked China for major financial help, mainly because the emerging economy boasts the world’s largest foreign currency reserves (a whopping $3.2 trillion) due to its robust export-driven economy. No one has ever come to China like this before: the proud Europeans probably wouldn’t have, had the situation been a little less dire.

Greek Prime Minister George Papandreou narrowly survived a confidence vote on November 5th, not long after he withdrew the call for referendum which stirred anxiety in European markets and beyond.  Papandreou is now under intense pressure to keep Greece away from bankruptcy and ensure that the country stays in the euro zone.

Supposedly it is in China’s self-interest to step in and aid Europe, since the European Union (EU) is its largest export market, and China would lose a significant amount of money if the euro did collapse.

Beijing, however, is treading carefully in its European policy, after being criticized at home for putting too much money into U.S. treasuries. Though the European debt crisis hasn’t dominated conversations in China, the word “Papandreou” was mentioned more on Weibo, the Chinese Twitter, during the week of October 31st than in the entirety of the past year. These tweets have been largely negative. One of them reads, “The Chinese have small pensions, and can’t afford to see a doctor or own a home. What about Europe? People there don’t go to work after 60; they enjoy pretty good lives. Poor people lending money to rich guys? That’s just absurd.”

As a country suffering from great social disparities among its 1.3 billion people, China has its own problems to worry about, including inflation and a real estate bubble. Also, as labor costs in China begin to rise, manufacturers are shifting their factories to Vietnam and Indonesia, or even back to the U.S., undermining one of China’s major sources of income and putting tens of thousands out of work.

So who should clean up Europe’s mess? The answer should be the nations who are responsible for this crisis.

Greece didn’t develop a debt almost 150% of its GDP in a day. It started as early as 1974, when the right-wing military junta of Greece was removed and the government was eager to bring left-leaning groups to the economic mainstream by running large structural deficits. Despite its already outstanding debt, Greece was invited to join the euro zone in 2001 and managed to hide its actual level of borrowing from the EU until 2010. Worse, after the financial crisis, Greece continued to sell things it “didn’t have” –government bonds, 70% of which are now held by foreigners.

Finally, starting this year, Greece has shown determination to tackle the problem by proposing spending cuts, taking austerity measures and trying to raise funds from the International Monetary Fund (IMF) and the EU.

Unfortunately, these attempts were largely unsuccessful. Numerous protests and strikes against higher taxes and an increase to the retirement age have rattled Greece; meanwhile, France and Germany, among other richer European countries, were hesitant to lend money, fearing that those funds would be necessary to bail out Italy, another struggling economy.

If the Europeans don’t take action, then who else should?

The debt crisis could have been prevented if the euro zone looked at southern Europe more closely before luring them to join. Spain, Portugal, Italy, and Greece – the countries at the heart of this problem – are all southern countries. They have exhibited a different philosophy from that of Northern and Western Europe when it comes to spending and working, and tend to be more relaxed and to spend more than they can afford.

When countries of different economic and political agendas are put together, problems occur. Those “laid-back” countries spent too much and, in order to comply with EU debt and deficit regulations, went to prominent U.S. investment banks for help. Companies like Goldman Sachs designed complex currency and credit derivatives structures to help these countries circumvent EU rules and mask their deficit and debt levels.

The world economy is more closely connected than ever. The quicker Europe gets on track, the less likely the crisis will have a ripple effect on its leading trade partners like the U.S., which certainly doesn’t want to be affected while its own economy is still staggering.

As the Chinese saying goes, “it is better for the doer to undo what he has done.”

Short URL:

Posted by on Nov 11 2011. Filed under More Opinion, Opinion, Recent Opinion. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Leave a Reply

Search Archive

Search by Date
Search by Category
Search with Google

© 2017 The Milton Measure. All Rights Reserved