Even as experts doubt the efficacy of Brazil’s proposal for BRICS nations to help the debt-ridden euro zone by buying bonds from those countries, the finance ministry today said it would approach the suggestion with an open mind.
It added, however, that the proposed meeting of BRICS (Brazil, Russia, India, China, South Africa) governments on the sidelines of the IMF-World Bank meeting in Washington later this week was not aimed at helping the euro zone countries, but to take stock of the global economic situation.
"We are going with an open mind. We have to see what is the nature of the bonds, how are they raised, what is the security of these papers. Only then, will we respond, others will respond," a key finance ministry official told Business Standard.
Finance minister Pranab Mukherjee will be on a four-day visit to the United States beginning September 21 for the Fund-Bank meeting, as well as other engagements on the sidelines.
Brazil had proposed that BRICS members make coordinated purchases of bonds of the euro zone countries. India has convened a BRICS meeting on September 22, on the sidelines of the Fund-Bank meeting, to explore the manner in which these countries could coordinate on the economic and financial situation.
“It is not that the meeting will discuss only Brazil's proposal. There will be many other issues to be deliberated on,” said the official.
Adding: “Europe comprises high-income countries, we are the poor one. At the same time, if growth falters in Europe, our exports will also be hit.” Europe accounts for around 20 per cent of India's exports.
The question is how much BRICS members can help the euro zone. Not much, said experts. BRICS members have total foreign exchange reserves of $4,450 billion, 72 per cent of which are with China. India had forex reserves of a little over $316 bn as on September 9.
Chinese premier Wen Jiabao had earlier said Beijing was willing to help the euro zone, but Europe must stop the crisis from growing. The finance ministry official said China has been extremely cautious on the issue of help to the euro zone.
Greece, Portugal and Ireland are facing a sovereign debt crisis and have already got billions in euro packages. However, the crisis is not getting solved and threatens to spread to other countries in Europe, which may have repercussions for the entire world economy.
