A few months after Chinese Vice Premier Li Keqiang’s visit to Spain in January this year which saw local newspapers hailing him as the new Mr Marshall — a reference to the American secretary of state after whom the post-war reconstruction programme in Europe was named — Spanish prime minister Jose Luis Rodriguez Zapatero is once again looking to China for economic salvation.
Zapatero, whose domestic austerity programme has been helping to limit, though not eliminate, speculation of Europe’s sovereign debt contagion spreading across the Iberian Peninsula, is currently in China.
In what has become somewhat of a pattern over the last year, Beijing’s leaders are once again playing the reassuring, responsible patrons to Europe’s struggling economies. In a meeting with Chinese Premier Wen Jiabao, Zapatero was assured that China would continue to buy Spanish bonds.
Speaking at a press conference after a meeting with investors in Beijing on Wednesday, Zapatero called China a “responsible and long-term investor” in Spanish debt. He revealed that Beijing currently holds more than 12 per cent of Spain’s government bonds from less than 4 per cent before the start of Europe’s debt crises.
“As an economic giant, China has expressed its confidence in the Spanish economy, especially when we are experiencing difficulties due to the eurozone debt problems,” he said.
China’s popularity amongst the European Union’s PIGS (Portugal, Italy, Greece and Spain) economies has soared in recent months with Beijing holding out quicker, no-strings attached financial and investment support that the eurozone’s own core countries led by Germany have been slow to offer.
Chinese leaders have consistently used the fiscal woes of European nations like Spain to build a case for Europe to look to China for relief. Writing in the Spanish newspaper El País back in January, the Chinese Vice Premier Li had thus held out the prospect of “colossal” business opportunities for Spain: “If each of the 1,300 million Chinese people consumed a bottle of olive oil or enjoyed a few glasses of wine, all of Spain’s annual production would probably not be sufficient to meet the demand.”
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Zapatero met with Li again on Tuesday this week and is also scheduled to hold talks with Chinese President Hu Jintao in China’s southern Hainan province on Thursday.
Spanish companies have signed agreements worth $1 billion with Chinese counterparts during Zapatero’s China trip. Spain’s Gamesa Corporacion Tecnologica has signed accords with three Chinese companies to supply turbines and wind power equipment.
Zapatero also clarified that Spain expects to meet its deficit-reduction targets this year without imposing new austerity measures. The country has already cut civil servant wages and frozen retirement pensions as part of an austerity plan designed to slash its bloated deficit. Its deficit target for this year is 6.0 per cent of GDP, down from about 9 per cent in 2010.
The Spanish PM insisted that there would be no more need for any further belt-tightening measures and allayed fears that following Portugal’s request for a bail out, Spain might be next in line. “There is no forecast on the horizon that we will have to take more austerity measures. None,” he said.