Default on IMF loan puts European nation closer to eurozone exit
Pensioners shout slogans during a protest outside the Finance Ministry in Athens, Greece, July 1, 2015. Greek Prime Minister Alexis Tsipras has written to international creditors saying Greece could accept their last bailout offer if some conditions were changed, but Germany expressed scepticism while saying the door was still open for negotiations. [Photo/Agencies]
China wants to see Greece remain in the eurozone, and there are ways to tackle the country's debt crisis through the efforts of the international community, China's Foreign Ministry and experts said.
"We hope to see that the EU and eurozone can appropriately resolve this issue and Greece can remain in the eurozone. This complies with the interests of all sides," Foreign Ministry spokeswoman Hua Chunying said on Wednesday.
Experts said the missed payment may lead to a downgrade of Greece's sovereign debt rating and spark more debt defaults.
"China will continue to play a constructive role in this regard."
Greece's failure to make a scheduled debt repayment to the International Monetary Fund on Tuesday was the first default by an advanced economy in the fund's history.
"China's direct lending to Greece, in terms of sovereign debt purchases under the bilateral loan agreement, is very limited. It accounts for a small part of all Greek borrowing," said He Maochun, director of the Economy and Diplomacy Research Center of Tsinghua University. The Chinese government has not released information about its total lending to Greece.
Some experts say the missed payment has dragged Greece into a dangerous place as it may be forced to exit the eurozone, a possibility known as the 'Grexit', if Greeks vote "no" on a bailout plan on Sunday.
"As a responsible, long-term holder of Eurobonds and a major trade partner of the EU, China would not like to see Greece leave the eurozone, " He said. "China will continue to talk with EU leaders to find better ways of solving the problem."
Greece, on the Mediterranean coast, is on the route of China's proposed New Silk Road Economic Belt and 21st Century Maritime Silk Road.
"It is an important country because it connects China with Europe through land and the maritime routes. Highways, railways, ports and coastal infrastructure in Greece are major projects for investment cooperation between the countries," said He.
Chen Xin, director at the Economics Department under the Institute of European Studies of the Chinese Academy of Social Sciences, said if the Greek debt crisis continues to escalate, it might derail the global economic recovery and damage the long-term viability of the euro as a currency.
"It is possible that the Greek government will take serious control of capital flows if the country exits the eurozone, and our companies will not be able to freely exchange capital back to China, which would mean their invested projects might face big losses."
Chen suggested Chinese companies re-evaluate investment risks in Greece.
"The Chinese government may support the country by injecting more capital into the IMF bailout fund, but it is a more complicated political issue and full of uncertainties," he added.
According to the Ministry of Commerce, Sino-Greek bilateral trade volume was $4.53 billion in 2014, an increase of 24 percent year-on-year. China's direct investment in Greece was around $1.3 billion last year.
"The Greek debt issue is crucial for Europe, and its implications for China are also important, given it is a very large market for China," Ayhan Kose, director of the Prospects Development of the World Bank Group, said on Wednesday in Beijing.
The World Bank's updated forecast for eurozone GDP growth is 1.5 percent this year and 1.8 percent in 2016, despite the Greek crisis.
"We are very pleased to see that the eurozone recovery is speeding up, as the quantitative easing policy is working and deflation risk is diminishing," said Kose.
