With crumbling investor confidence, rising unemployment and economies floundering, the deepening euro-zone crisis is having significant effects on the global stage, so it’s unsurprising that world leaders outside the currency bloc are keen to put forward their views on what should be done.
China is one nation which has felt the repercussions of European turmoil. Recent data has demonstrated that the Chinese economy is cooling with growth for 2012 an estimated 1.2 per cent lower than the previous year. During a gathering at Beijing’s Great Hall of the People, Chinese Premier Wen Jiabao commented; ‘Recently, the European debt crisis has continued to worsen giving rise to serious concerns in the international community. Frankly speaking, I am also worried.’ He then informed visiting German Chancellor Angela Merkel of the steps he felt should be taken next.
Although similar consultations with the Chinese Premier are generally held annually, this is the second time Merkel has taken a trip to China in the past seven months. On the latest stop of her international diplomatic tour she was accompanied by influential ministers and business delegates and was acting as a representative of the European Union as well as Germany.
Wen was firm in expressing his belief that in order to prevent the worsening of the sovereign debt crisis afflicting the 17-nation euro-zone ‘comprehensive measures’ must be taken by the most deeply troubled countries – Greece, Spain and Italy
Wen stated: ‘The main worries are two-fold: first is whether Greece will leave the euro zone. The second is whether Italy and Spain will take comprehensive rescue measures: resolving these two problems rests with whether Greece, Spain, Italy and other countries have the determination for reform.’
Merkel returned with comments of her own and attempted to give the euro zone the hard sell to investors.
Following Wen’s meeting with Merkel the Chinese leader declared that his confidence regarding eventual euro zone recovery had increased.
Assuring China of positive action is key as the European Union receives the majority of Chinese exports and keeping strong trade links is essential if the global slowdown is to be countered, but bolstering China’s confidence is also of particular importance to Germany. Almost half of China bound European exports come from the nation, and Chinese companies contributed the largest investment in Germany in 2011. As well as offering reassurance Merkel used the visit to secure contracts for German companies.
Winning such contracts is vital if the largest economy in the euro zone is to avoid the slippery slope of recession. The latest reports have shown that as a result of weakened investment and a decreased demand for exports, German unemployment has increased for a fifth successive month. Although the adjusted jobless rate remained at 6.8 per cent, the number of German citizens out of work has risen to 2.90 million.
A senior economist for Brussels’ ING Group, Carsten Brzeski, remarked on the wider implications of this development. He said ‘The strong labor market has been one of the main drivers of German growth in the first half of the year. Today’s numbers provide further evidence that that labor market is gradually losing steam and that the positive impact on the economy should peter out toward the end of the year.
Although many would deem Merkel’s trip a success, some critics have voiced concerns regarding a tighter Germany-China bond, arguing that it poses a threat to a Europe attempting to engage in more strategic dealings with the eastern nation.