acting-man.com / By Pater Tenebrarum / November 19, 2012
China’s Sovereign Wealth Fund Warns on Euro
The always outspoken head of China’s sovereign wealth fund, Jin Liqun, has once again uttered a warning on the still simmering euro area crisis. China of course has quite a few problems itself, and the euro area’s economic contraction is actually one of them. Due to its export dependence, China needs Europe to be in better health than it is. Jin evidently realizes that the attempts to solve the crisis have by no means succeeded yet. In fact, he recognizes that the strategy pursued by the eurocracy isn’t likely to get anywhere but ‘a blind alley’, as he puts it. Unfortunately he too cannot really offer a recipe:
„The current strategy is leading us up a blind alley,” Jin said of efforts so far by European policymakers to solve the crisis.
He added that the failure of the European Union to deal with its debt crisis was damaging for the world and that “the eurozone needs to strike a proper balance between austerity and growth”.
Jin was speaking at a business forum in Beijing. Talking to the Guardian after his speech, he said: “European governments should be given some time … If you ask the Greek people to slash their spending by 30-40pc, it’s not possible. So there should be some tolerance, but the determination to carry on austerity should not be relaxed. It is only the issue of how you can balance one against the other.”
Jin has previously said that that working harder and longer would help pull the eurozone out of recession. But, the Guardian reported that on Friday, Jin said that recent protests across the eurozone showed that austerity has stretched the public’s tolerance “to breaking point”.
China’s sovereign wealth fund is one of the largest in the world. Earlier this year, the fund said it no longer wanted to buy European government debt.
We’re not sure what exactly Jin means with his recommendations of a ‘mixture of tolerance and austerity’, as he didn’t go into details on that particular point. Evidently though he can see that the current course has led Europe to a socially and politically explosive juncture. In China the political leadership is extraordinarily attuned to the preservation of social harmony, as that is seen as a guarantee to its own survival. It isn’t much different though for the elected politicians of Europe. Today they are facing an ever growing spiral of discontent as the euro area’s economies contract.
What makes the situation so explosive can be seen in the chart below – unemployment in the euro area has reached a new record high.
Euro area and total EU unemployment rates have shot to a record high. Obviously there are wide ranges between the different member states, with unemployment in Spain, Greece and Portugal the highest at 25.8%, 25.2% and 15.8% respectively