Wen gives Merkel straight talk on euro crisis: Frankly, I'm worried

Premier's frank admission about euro zone as German chancellor arrives back in Beijing

PUBLISHED : Friday, 31 August, 2012, 12:00am
UPDATED : Friday, 31 August, 2012, 8:37am

Premier Wen Jiabao voiced his fears about the European debt crisis yesterday after a meeting with visiting German Chancellor Dr Angela Merkel.

"The European debt crisis has continued to worsen, giving rise to serious concerns in the international community. Frankly speaking, I am also worried," Wen said.

"The main worries are two-fold. First is whether Greece will leave the euro zone, and the second is whether Italy and Spain will ask for comprehensive rescue measures."

He called on Greece, Spain and Italy to embrace budget cuts and other reforms to restore confidence in the fragile euro zone.

Merkel said Europe had implemented reforms to restore confidence in the euro and she wanted Greece to remain part of the monetary union.

"Many reforms are going on now, and there is an absolute political will to turn the euro into a strong currency again," she said. "I am convinced that the reforms will bear fruit."

Wen said he was confident the euro zone could emerge from the crisis after hearing Merkel's views and China would continue investing in the debt-stricken countries, but on the condition that "the risks involved are fully evaluated".

"Honestly speaking, the implementation of the measures pledged by European countries will not be completely smooth," he said.

Merkel, accompanied by a 20-member delegation of business executives on her second trip to China in six months, is hoping to strengthen trade ties and obtain assurances from Beijing that it will support the euro zone.

The two leaders presided over the signing of a series of deals in the aviation, car and telecommunications sectors. In a joint communiqué issued after the talks, both countries said they recognised each other's efforts in tackling the debt crisis.

Chinese confidence in the currency bloc was hit earlier this year when Chinese investors were forced to take substantial losses on their Greek bonds as Athens pushed through a debt restructuring backed by its European partners.

In a separate meeting, President Hu Jintao told Merkel that tackling the Euro debt crisis was conducive to global economic recovery and the economic development of China, and added that China was willing to work with Europe and the International Monetary Fund.

Ding Chun, director of the Centre for European Studies at Shanghai's Fudan University, said China would be more cautious about investing in the euro zone.

"China is very concerned about the problems facing Europe," he said. "Any fluctuation in the continent will affect the value of China's assets."

The two countries vowed to deepen political and economic co-operation. A Sino-German economic committee will be established to spearhead bilateral economic co-operation, and both countries will facilitate the use of the yuan and euro in bilateral trade and investment.

China's ICBC Leasing and Airbus signed a US$3.5 billion (HK$27 billion) deal for 50 Airbus SAS A320 aircraft, and Volkswagen signed a deal to invest US$219 million in an environmentally friendly factory and training in Tianjin .

Both sides also discussed Syria and pledged to strengthen communication on major international issues, according to the joint communiqué.