EU must also help itself

Updated: 2012-02-17 07:55

(China Daily)

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China is putting flesh on the bones of its commitment to work together with the European Union to address the evolving European sovereign debt crisis.

Both President Hu Jintao and Premier Wen Jiabao assured visiting EU leaders that the country supports global efforts to back the eurozone and Europe.

On Wednesday, China's central bank also pledged it will increase its holdings of euro-denominated assets.

Though specific investment plans are yet to be announced, China's willingness to help clearly goes far beyond rhetoric. And the reason is more than obvious as the two sides rank among each other's top trade partners and China is eager to diversify its portfolio of foreign exchange reserves.

However, while such external support is important if Europe is to survive the ongoing debt crisis, it is unrealistic to expect too much of such help.

The eurozone must come up with a credible long-term solution of its own.

The international community's confidence in the euro's role and its prospects depends not just on European policymakers' will and ability to avoid a full-blown sovereign debt crisis in any eurozone nation in the short term. It also hinges on the EU policymakers' determination to face up to the fundamental economic woes in many debt-laden countries and implement painful structural reforms.

The harsh austerity measures that EU leaders are demanding from Greece are in theory an antidote to its indebtedness.

Since Greece is already bordering on becoming the first eurozone member in the history of the currency bloc to default, a deep budget cut is the least that its lenders will require for their continued support.

Admittedly, debt-laden countries should be held accountable for their rapid accumulation of debt, which was enabled by the creation of the single currency market more than a decade ago. But that does not mean EU policymakers can ignore the difficult and painful task of implementing fiscal consolidation plans.

The recent protests in Athens should have driven home the message to Greece's creditors that the public felt it was unfair and unacceptable to bear the brunt of the austerity measures without being offered a credible roadmap for the future.

A self-help program within the eurozone is therefore badly needed.

It is believed that Europe can find a better way to make use of its overall strength to expedite economic recovery in those debt-laden countries.

Only then will external help really work as hoped.

(China Daily 02/17/2012 page8)