No short-term end to eurozone crisis
Updated: 2012-06-19 10:43
Senior researcher at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences
The election results from Greece have created a positive "turning point" for the eurozone debt crisis. It soothed the anxiety and panic of investors and the public, and will curb the flight of deposits from European banks. Although all the stakeholders could be relieved for a while, it's impossible that the debt crisis will come to an end in the short term. Austerity is too shortsighted a method to solve the debt problem. In the future, the eurozone must put more emphasis on stimulating economic growth, otherwise Italy will be the fifth country to beg for aid.
The current situation has proved that the measures adopted by Europe to fight the fire didn't work. Apparently, it's time to change the way of thinking.
First, the European leaders must find ways to save the banks, to make sure the banks don't fail. While implementing austerity, the eurozone should reach a consensus on issuing EU bonds. And the European Central Bank could further intervene in an "appropriate" way to provide backup for the countries in trouble. It should be allowed to purchase European treasury bonds directly, or buy the treasury bonds from the vaults of commercial banks.
As the world's second-largest economy, and a major trade partner with Europe, China should and must play a positive role in supporting the EU to solve the debt crisis. In the past few months, China's economy has been obviously affected by the eurozone's problems.
China also has to take on more obligations to help Europe overcome the current difficulties. But given the high-level risks of the eurozone, it's better for China to help through international institutions such as the IMF, which has better credit and would work as an underwriter for Europe. However, the government should keep in mind that Europe leaders should, and still could solve their own problems in a decent way.
Chinese enterprises have taken effective measures to reduce the negative effects of the European situation. Exporters have been exploring the domestic market and emerging markets, and such efforts should be strengthened.
For the government, it should watch how the situation develops very carefully and maintain smooth communications with European leaders. The authorities could also help create more investment opportunities for enterprises that are interested in developing business in Europe.