Saturday

2nd Mar 2024

China shows interest in sponsoring EU bail-outs

  • EUobserver understands that China already holds €6 bn to €8 bn of wobbly Greek debt (Photo: dolmansaxlil)

With the eurozone short of money to prop up bad sovereign debt and with China keen to save its main export market from disaster, EU officials are exploring ways to involve the Asian giant in their anti-crisis fund, the EFSF.

No detailed proposals have been passed to Beijing at this stage, but Chinese diplomats understand from informal channels that two options are on the table: direct involvement in the EFSF via a special purpose investment vehicle (SPIV) or increased participation in the International Monetary Fund (IMF), with the IMF channeling the money to Europe.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The outstanding details include: how much money the EU wants; how any SPIV would be divided with other new sponsors, such as Brazil; what would be its decision-making structure; and what portfolio of investments it would hold.

"China supports the EU's effort to fight the crisis and has already delivered some measures, like buying Greek bonds, and will continue to help, but as regards the SPIV issue, up to now there is nothing substantial enough to respond to," a Chinese diplomat told EUobserver on Wednesday (26 October).

The China Daily, the country's state-owned English-language newspaper, reported the same day, citing EU sources, that Beijing has provisionally agreed to participate in eurozone rescue schemes.

For his part, the chief of the Luxembourg-based EFSF, German economist Klaus Regling, will flesh out ideas when he visits Beijing on Friday.

According to a four-page EFSF options paper drafted by EU institutions on 23 October and seen by EUobserver, EU leaders are looking to create either one central SPIV or several SPIVs each covering a given debt-hobbled country, such as Greece or Italy.

"The SPIV ... would aim to create additional liquidity and market capacity to extend loans, for bank recapitalisation via a member state and for buying bonds in the primary and secondary market with the intention of reducing member states' cost of issuance," the paper says.

The SPIV or SPIVs would buy eurozone bonds using money from private sector investors, sovereign wealth funds and the EFSF proper. It would be credit-rated by agencies like Moody's. In the event of a default, the private-sector investors would be first in line to get money back. Sovereign wealth funds such as China would be second and the EFSF would take the biggest hit.

Quid pro quo?

French paper La Tribune in January reported China already holds some €650 billion in eurozone bonds. EUobserver understands that €6 billion to €8 billion of this is Greek debt.

One question is whether Beijing will ask the EU to give it market economy status earlier than previosusly agreed in 2016 or lift its embargo on arms exports in return for help.

Even if the EU wanted to reward its Asian sponsor, the decision on market status could be long in coming due to divisions among member states

An EU official told this website the UK is in favour; Italy, Poland and Spain are against; while France and Germany cannot make up their minds. The foreign ministries of the two countries are willing, but the finance ministries are not.

The EU contact noted China will make any EFSF decision based on much bigger questions of national interest than market economy status. The new status would add up to little more than lower EU import tariffs for some Chinese goods.

"It would be a symbol of goodwill. But you will not convince the Chinese to get involved in the EFSF becaue of this. It's just a different way of calculating anti-dumping cases," he said.

China: 'You can't depend on us alone to rescue Greece'

A 'regular' phone call between EU commission chief Jose Manuel Barroso and Chinese Prime Minister Wen Jiabao on Friday morning was aimed at reassuring markets that China will continue to support the ailing eurozone. But a Chinese diplomat noted that Beijing will only buy those bonds guaranteed to be paid back.

Sarkozy: EU should welcome Chinese bail-out money

French leader Nicolas Sarkozy has said people should feel relaxed about China taking part in future EU bail-outs. But his political opponents warn there will be a price to pay.

Opinion

The macabre saga of Navalny's corpse

With Alexei Navalny's funeral in Moscow on Friday, Vladimir Putin's regime haven't just insulted his mother and widow with their treatment of his corpse — they've breached international treaties and conventions.

Latest News

  1. EU docks €32m in funding to UN Gaza agency pending audit
  2. 'Outdated' rules bar MEP from entering plenary with child
  3. Commission plays down row over Rwanda minerals pact
  4. EU socialists set to anoint placeholder candidate
  5. Why are the banking lobby afraid of a digital euro?
  6. Deepfake dystopia — Russia's disinformation in Spain and Italy
  7. Putin's nuclear riposte to Macron fails to impress EU diplomats
  8. EU won't yet commit funding UN agency in Gaza amid hunger

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us