The world's banker
One wonders what the world will look like when the music stops, The Globe and Mail reported.
China, the economic engine of the post-recession era, has already been on a buying spree, striking deals around the world largely in the resources sector. It's also the biggest foreign holder of America's debt, and has helped buoy other countries and companies. Now, it it's also poised to come to Rome's aid as Italy becomes the latest victim of Europe's debt crisis.
Italy confirmed today that Finance Minister Giulio Tremonti met this month with Chinese officials, who hold massive foreign exchange reserves, to drum up support for its bonds. It's not clear how much of a difference this will make to Italy, but it's yet another signal of China's increasing importance to a world in turmoil.
Does China even have the heft? With $3-trillion (U.S.) in currency reserves, Carl Weinberg of High Frequency Economics doesn't think so.
"These maths suggest that China is just not big enough to move the Italian bond market much, or to save the entire economy," the chief economist said in a research note today.
"For what it is worth, it should be clear that the ECB does not have the muscle to do this, either. Altogether, the bond markets of the PIIGS add up to €3-trillion. China's participation would be nice and would help, but China alone cannot pick up the slack if the world decides it ain't buying any more Euroland paper."
Reports from Sao Paulo today also suggest that the full BRICS contingent - Brazil, Russia, India, China and South Africa - will meet soon to discuss helping the euro zone through its crisis.
The reports came as European officials, notably German Chancellor Angela Merkel, scrambled to reassure markets that Greece is not about to default on its debts, which, in the eyes of many obsevers, has become a when-not-if scenario.
It took a Russian business leader to put it all in perspective today with a warning that Europe has only "two very bad options," including expelling a country from the monetary union or cutting spending even more.
"If I was a politician in Europe, I would commit suicide,” Vladimir Potanin, a major shareholder in Norilsk Nickel, who's said to be personally worth almost $18-billion (U.S.), told a Reuters investment summit in Moscow.
“There is really such a big difference between the interests of different countries, I simply do not understand how you can match the interests of Germany and Greece,” Mr. Potanin said. Read more.
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