China and Japan, the world’s second-and third-biggest economies, indicated support for Europe’s new rescue fund as they pushed for quick implementation of measures to solve the region’s crisis.
China will “cooperate” with the European Stability Mechanism, a permanent 500 billion-euro ($648 billion) fund that started this week, People’s Bank of China Deputy Governor Yi Gang said today at a seminar in Tokyo. Japan’s Vice Finance Minister Takehiko Nakao said at the same event that the country will “positively consider’ buying bonds issued by the ESM.
Three years since the crisis began, the International Monetary Fund warned this week that failure to remedy Europe’s problems was raising the risk of a steeper slowdown in the world economy. Spain is in the sights of investors as it mulls whether to ask for a bailout and accept the conditions required for the European Central Bank to start buying its bonds.
‘‘We will continue our cooperation with the European Financial Stability Facility and the future ESM,” the PBOC’s Yi said in the seminar at the IMF’s annual meeting. He said that China would support the efforts of the European Union, the European Central Bank and the IMF, playing “a minor role.”
At the same time as China and Japan signaled support for Europe’s rescue funds, officials had advice on what more is needed to counter the crisis dragging down global growth.
Yi, one of the leaders of China’s delegation to the IMF meetings, said that policies announced in the past few months by the European Union, the euro region, and individual nations now need to be fully implemented “to restore and rebuild confidence.”
Japan’s Finance Minister Koriki Jojima said today that Europe should take responsibility to resolve its debt crisis and implement measures quickly.
The euro-area crisis has hurt China and Japan’s export-driven economies by chilling global demand. The IMF this week reduced its estimate for China’s 2012 growth to the weakest pace since 1999, while Morgan Stanley and Bank of America Merrill Lynch see Japan’s economy shrinking for two consecutive quarters through December.
The ESM will replace the temporary European Financial Stability Facility, which has committed 192 billion euros of its 440 billion euros on loans to Ireland, Portugal and Greece. The two funds will run in parallel until the EFSF is phased out in mid-2013.
Controlled by euro finance ministers, the ESM can lend directly to governments, intervene in bond markets, offer credit lines and provide loans that can be used to recapitalize banks. It would be authorized to pump capital into banks directly once the euro zone sets up a central supervisor, possibly in 2013.