Members of the global grouping know as the BRICS -- Brazil, Russia, India, China and South Africa --- will meet in Washington this week to talk about ways they can help Europe with its debt crisis. The chance for emerging nations to lend the developed world a hand is a unique opportunity, and a sign of their growing influence on the global stage.
Europe is in turmoil over its beleaguered economy and so austerity measures meant to resolve its debt crisis have met with public backlash.
European Union finance ministers met in Poland last week in search of answers, joined by U.S. Treasury Secretary Timothy Geithner.
“Europe’s obviously under a lot of pressure, and they face a lot of challenges and it’s affecting us. It’s affecting confidence here and around the world; not just in Europe,” Geithner said.
And that’s where the BRICS come in. China and other emerging nations have weathered the global financial crisis and have deep pockets of foreign currency reserves.
Chinese economist Luo Xiaopeng says there is no doubt China will offer to help.
“They have to do this for many reasons. One is the Chinese economy is still really reliant on exports,” Luo said.
Europe is China’s second largest trading market and the euro accounts for nearly 30 percent of China's $3 trillion in foreign reserves. And China wants to shift more of its reserves to the euro to reduce its reliance on the U.S. dollar.
“Now if for some reason the eurozone collapses because of Greece, Italy, Portugal or Spain go down in a chain, this would be what I call a global financial crisis. It will drag everybody down,” said Yukon Huang, a senior associate at the Carnegie Endowment for International Peace.
But, it is unlikely China or others will lend Europe a hand, he says, until Europe has a solution to its debt crisis in place.
“Right now there’s no such agreement. So China is not going to put its money into a situation where there are, in fact, enormous risks and only downsides,” Huang said.
If China does step in to help, some analysts and Chinese state media suggest that China could use its aid to Europe to try to get earlier recognition of China as a full-market economy, or an economy that operates according to market forces. It's a status China has long viewed as offensive.
“After so many years of humiliation [from Europe], there is kind of a kneeling down to beg from us. So this kind of a thing you cannot underestimate the satisfaction and joy of those Chinese politicians,” Luo said.
For now, the uncertainty in Europe and what is being done to address the eurozone's debt crisis will be front and center when BRICS finance ministers meet in Washington Thursday.
