Mon, September 24, 2012
Business > Economy > Hu Jintao visits Denmark, attends G20 summit

Euro zone must stand on its own feet

2012-06-20 01:16:12 GMT2012-06-20 09:16:12(Beijing Time)  SINA.com

By Li Hongmei, Special to Sina English

Debt-ridden eurozone again held the G-20 summit as hostage and derailed the set theme of unfolded Mexico meeting convening heads of state and leaders of international organs.

Even though emerging powers led by China pledged to pump up IMF global firewall, helping it raise US$456 billion in resources as the eurozone crisis rages, French President Francois Hollande said on Tuesday that he and German Chancellor Angela Merkel were both aware that the euro zone needed to come up with its own solutions to solve the bloc's debt crisis rather than seek outside help.

"We can have differing points of view ... but Mrs. Merkel and I know that Europe must have its own response," he told journalists at a meeting of leaders from G20 nations in Mexico. "It must not be given to us from the outside."

"The IMF (International Monetary Fund) is not there to backstop the euro zone even if it has done so for some countries, as we saw in Greece," he added.

In an announcement late Monday, the IMF said China was offering US$43 billion, Brazil, Russia, India and Mexico US$10 billion each, US$5 billion from Turkey, and smaller sums from a handful of other up-and-coming economies.

China's contribution was the most keenly awaited. The world's second largest economy has the largest pile of foreign reserves, US$3.2 trillion.

But, China is still a developing country in essence, and has a population of about 130 million still struggling below the poverty line. Experts predict that the shortage of pension pool will possibly grill the country within the decade, with the lengthened life expectancy and aggravating population aging.

The largest economy, the United States, on the other hand is not contributing, despite its huge voting power on the IMF board.

While Washington has insisted Europe has enough resources to resolve its problems itself, it is also clear that the deeply divided Congress is in no mood, given the US economic problems, to contribute rescue funds for others.

The contributions from the BRICS came with warnings that they want to see changes at the IMF, long dominated by the now troubled economic powers of Europe and the United States, which itself has not contributed to the firewall.

Meeting on the sidelines of the Group of 20 summit in the Mexican resort, the five BRICS leaders renewed their call for a greater say at the IMF and World Bank, both historically dominated by the United States and Europe.

"These new contributions are being made in anticipation that all the reforms agreed upon in 2010 will be fully implemented in a timely manner, including a comprehensive reform of voting power and reform of quota shares," they said.

They also said the new funding would be tapped only after the IMF's existing pool of resources -- US$380 billion -- is used.

"This would promote adequate burden sharing amongst IMF creditors," they said, in an apparent dig at Washington for its non-participation in the new fund-raising.

The new contributions are well below the US$500 billion, a sum that would be an adequate expansion of IMF’s crisis intervention funding, given the likelihood of more contagion in the troubled eurozone.

But, what Mr. Hollande said makes sense in the long term ---- the euro zone needs to come up with its own solutions to solve the bloc's debt crisis rather than seek outside help.

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${Hu visits Denmark, attends G20 Summit}

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