China says debt financing unlikely ‘to save’ US, EU
China said Friday that debt deals in the United States and in Europe would not be enough to save their economies and “concrete steps” must be taken to rebalance the global economy.
“The only way the Americans have come up with to improve economic growth has been to take on new loans to repay the old ones,” a blistering commentary published on the official Xinhua news agency said.
“To eat May’s grain in April, however, will never be a permanent solution to a problem,” the report said.
China warned on Wednesday that Washington’s efforts to raise the US limit on borrowing had failed to defuse America’s “debt bomb” and signalled that Beijing would further diversify its holdings away from the dollar.
After months of bitter negotiations with his Republican rivals, US President Barack Obama finally signed an emergency bill on Tuesday that averted what would have been a disastrous debt default for the world’s biggest economy.
Beijing’s latest comments rounded on Thursday’s 500-point drop in the Dow Jones industrial index, noting that it had exposed “the plight of western economies and their deep structural defects.”
“The United States has long been maintaining economic growth and excessive consumption by means of debt financing, hence masses of economic bubbles, which eventually triggered the financial crisis,” the commentary said.
The commentary also took aim at the European Union, whose members recently constructed a deal to stave off a sovereign debt crisis in Greece in fear that it would be a harbinger to a wider and deeper credit malaise in the eurozone.
“The current bailouts offered by international bodies such as the EU are in a sense, to ‘rob Peter to pay Paul’,” it said.
“Only by introducing reform can they save themselves; only with a sound economic structure can they assume responsibility for the world economy.”