27th October 2011
China's approach to the crisis has been paternalistic, keen to show that they are helping out in the hope of winning a more powerful place on the world stage.
"Leading emerging economies such as China have reportedly agreed to help the European Union increase its bailout fund through the International Monetary Fund (IMF), said a reliable source close to EU decision-makers. If this happens, China and other emerging economies may obtain more influence in the global financial system ahead of G20 summit scheduled for Nov 3 to 4 in Cannes, France.
Within the IMF, an increased contribution means more voting rights. Emerging economies have long calling for a bigger say in the organization, which has been dominated by developed economies and in which the United States has a veto."
Commentary in Brazil shows the extent to which the agenda of many emerging markets diverges from those of developed markets. It is a more naturally socialist take on the crisis. President Dilma Rousseff is quoted as saying: "Lack of financial resources is not an excuse for rich countries not to find a solution for the crisis. It is due to lack of political resources and, sometimes, straight thinking."
This affirmation of a more socialist agenda is – unsurprisingly – also seen in the Russian press. The translation is clunky, but the sentiment is clear: "Wall Street has made an enormous contribution to economic imbalances. Increased profits in the finance sector have led to the fact that revenues have risen dramatically in just the richest one percent of the population (and especially in the most affluent strata in this group – 0.1%). And politicians have only helped to strengthen the inequality.
"The recent crisis has proved all the allegations that modern finance to reduce the risk and made the system more stable to be complete nonsense. Only state aid measures have saved us from financial ruin, no less or even more dangerous than the one that caused the Great Depression."
The Asian media is more measured. But the implication is still that it is very much a problem happening to someone else. Certainly many of these countries are forging trade links away from developed markets and as a consequence, do not fear its weakness in the same way.
Mindful Money's Shaun Richards says: "We think of ourselves as ‘first world', but in South-East Asia – one of the fastest growing areas of the global economy, do they necessarily agree? They may be in a position to demote us. I suspect that we need to think about Europe a little less in the UK and start doing a little more of our business in South-East Asia. This is where the action is. Otherwise we risk becoming a backwater."
But before we suggest that the Eurozone crisis is of no consequence to the emerging markets, it is worth considering the effect on those Eurozone hopefuls in Eastern Europe. For years, the dream of the convergence trade has buoyed the economies and stock markets of these countries. In theory, the Eurozone crisis should have made membership of the Eurozone look less attractive, but – bizarrely – many of these countries are still keen to join. This suggests that, for its neighbours at least, Europe still matters.
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