China considers taking part in European rescue funds

China is considering increasing its participation in the rescue funds aimed at resolving the European debt crisis.

Chinese Premier Wen Jiabao made the claim last night but did not make explicit commitments to the European Stability Mechanism (ESM).

It came as petition to force a referendum on the fiscal treaty has been launched as a number of eminent economists told Oireachtas members the agreement was bad economics, but said the country had little choice but to sign up.

Outside the Dáil, Socialist Party MEP Paul Murphy, who is part of the European United Left group in the European Parliament, launched his referendumnow.eu website to collect names in support of holding a vote.

He accused the Government of hiding behind the Attorney General and said the referendum was a political not a legal question. “It adds insult to injury to attempt to sign Ireland up for this austerity treaty without a referendum.”

In Brussels, Independent MEP Marian Harkin accused EU leaders of blackmail since only those ratifying it would be able to access cheap money in the ESM rescue fund.

However, even if the rules on balancing government budgets and cutting debt were implemented, it would not solve the euro’s problems, politicians and economists argued.

Tom McDonnell, from independent think-tank TASC, told the Oireachtas joint committee on EU affairs that unless the country has the money to bring its infrastructure up to the standard of the eurozone core, it will “continue to struggle within the currency union”.

Prof Karl Whelan described the treaty as terrible economics, but favoured Ireland signing it, to ensure access to the ESM — otherwise the country could be cut out of the bond market.

Ms Harkin said Ireland had just about survived four years of austerity and the debt levels were unsustainable. “Yet we are told that more of the same without any commitment to eurobonds, redemption funds, or debt restructuring will solve our problems. It will not, and cannot, and, given that our access to the ESM is tied into ratification of the treaty, it is little short of blackmail.”

Eurozone countries yesterday signed the ESM treaty which envisages making the permanent rescue mechanism operational from July. It will offer countries cheap short-term funding without necessarily tying them to a programme.

Mr Wen said China was studying how it might lend further support. The ESM, a €500bn fund, will replace the temporary EFSF, which bailed out Ireland and Portugal and will help the second Greek package.

China, with its $3.2tn (€2.43tn) worth foreign exchange reserves, is often seen as a potential source for the funds that are needed to bail out some European governments.

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