Wen Tells Merkel Spain, Italy, Greece Need More Reforms

Wen Tells Merkel Spain, Italy, Greece Need to Step Up Overhaul
Wen Jiabao, China's premier, right, and Angela Merkel, Germany's chancellor attend the welcoming ceremony at the Great Hall of the People in Beijing. Photographer: Mark Ralston/AFP/Getty Images

Chinese Premier Wen Jiabao told his German counterpart that Spain, Italy and Greece must take steps to prevent a worsening of the euro region’s sovereign-debt crisis as he pledged to consider further European bond purchases.

“The main worries are two-fold: First is whether Greece will leave the euro zone,” Wen said after meeting Chancellor Angela Merkel in Beijing, a pool report showed. “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.”

With decisions affecting the euro’s future pending in the coming two weeks from European Central Bank policy makers, German judges and Dutch voters, Wen said that “China is willing, on condition of fully evaluating the risks, to continue to invest in the euro zone sovereign debt market.” Europe’s crisis has eroded demand in China’s second-largest export destination, contributing to a slowdown in the world’s No. 2 economy.

“Wen produced a few euro-positive headlines,” Chris Walker, a UBS AG currency analyst in London, wrote in a note to clients. “We note it was not clear whether this implied any net increase in existing exposures.”

The euro was up 0.2 percent at $1.2551 as of 1:30 p.m. in London. The Stoxx Europe 600 Index was down 0.3 percent, heading for a third day of declines.

Hu Jintao

Meeting Merkel today, Chinese President Hu Jintao said his nation supports Europe’s efforts to overcome the debt crisis and is ready to maintain “communication and coordination” to promote recovery and growth in the world economy.

Wen said he was more confident about the euro area after meeting today with Merkel. Their meeting coincided with the signing of a $3.5 billion agreement for the leasing arm of Beijing-based Industrial & Commercial Bank of China Ltd. to buy 50 Airbus SAS A320 aircraft, one of more than 10 accords signed today, the official Xinhua News Agency reported.

“China definitely has more leverage here,” Fredrik Erixon, head of the Brussels-based European Centre for International Political Economy, said in a telephone interview. “Europe is really, really keen on getting more market access to China. European companies want to shift sales to growth markets.”

Increased Confidence

“After I heard her views, it increased my confidence,” Wen said at the Great Hall of the People. “But I must honestly say, the implementation of these measures won’t be completely smooth.” Wen said he was “worried” about the European debt crisis.

The European Union is China’s biggest export market after the U.S., and shipments are plunging, exacerbating the slowdown in China’s own economic growth. China’s exports to the EU fell 16.2 percent in July from a year earlier, with sales to Italy falling 35.8 percent, according to Chinese customs figures.

In addition to winning contracts for German companies, Merkel is trying to convince Wen and other Chinese leaders that the euro region is a good place to invest. She also met with Vice President Xi Jinping today.

Gross domestic product in the 17-nation currency bloc fell 0.2 percent from the first quarter, the EU’s statistics office said Aug. 14.

The euro has depreciated 3.2 percent against the dollar this year after Spain and Cyprus were both forced to ask for external aid in June, joining Greece, Ireland and Portugal. The European currency traded at $1.2551 at 11:02 a.m. in Brussels, up 0.2 percent on the day.

Merkel said “it’s very, very important that we regain confidence in all the countries” of the euro region and thanked China for maintaining confidence in the joint currency. Merkel said she told Wen that euro-area nations are overhauling their economies “and that there is an absolute political will in the euro zone to make the euro a stable currency again.”

— With assistance by Penny Peng

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