China to Europe: ‘Your worn out welfare society and outdated labor laws induce sloth, indolence and penalize hard work.’
Today was a bad day in the continuing drama of the soap opera we call Europe.
Focus shifted from an insolvent Greece to a potentially insolvent Italy. The back breaker is that the cost of borrowing for Italy spiked above 7% for their 10 year bond, which most economists say is unsustainable.
Greek insolvency was a manageable problem because the Greek economy is a pimple on the ass of the European economy. Italy, OTOH, is the eighth largest economy in the world. Not only is Italy too big to fail, it it may be to big to bail. Bailing Italy out of a debt crisis would have to come from one of three sources.
- The International Monetary Fund (IMF) which is highly reliant on funding by the US. What do you think the domestic political appetite is for US taxpayers bailing out Italy and the Eurozone via the IMF?
- The European Central Bank (ECB), which is legally constrained from doing so, doesn’t have the money anyway, and says they won’t do it.
- The European Financial Stability Facility (EFSF) which was the centerpiece of the Eurozone Debt “solution” touted by Merkel and Sarkozy way back two week ago. Problem being – they were expecting the Big Panda to fund those bonds. Yeah, that is not happening either. Here is why…
Al Jazeera’s Teymon Nabili recently interviewed Jin Liqun, Chairman of China’s Sovereign Wealth Fund. The remarkable interview has garnered deserved attention in the blogosphere and MSM. It is well worth the 30 minute investment of time, but for those who want to skip right to the good parts, I’ll offer a few highlights.
“You cannot come to me, asking me ‘Hey! Why don’t you pump money in this kind of… projects, or investing the banks that are in trouble… we are in trouble, and our two countries are friendly, so why don’t you come in?’, this is actually in stark contrast to the requirement imposed on our sovereign wealth fund”, “the recipient countries should treat sovereign wealth funds fairly… as any other financial investors…”
This is a perfectly reasonable investment posture, but apparently a surprise to the European leadership.
Even more interesting, is the explicit, no BS, no mincing of words, no diplomatic artifice with which Jin Liqun lectures Europe on exactly the problem with the Eurozone labor laws and welfare state.
This excerpt around 12:10 in the YouTube video (I’d embed it here, but my Donk permissions don’t let me embed video):
NABILI: “There are many in Europe who consider their own situation as being right on the brink. Even after this apparent agreement between the leaders of Europe on how to save Greece and stabilize their economies, there are still some who say this is matter of merely postponing the crisis … if there isn’t some form of much stronger commitment, for instance from the Chinese, we really are at the point of disaster. There is going to have to come a point here where a decision has to be made and soon. I know you are not speaking on behalf of the Chinese government, but is China going to step in and play that role? “
LIQUN: “We in China, we in the CIC, are actively looking for investment opportunities that are good for both sides… We are upbeat about Europe, but firstly Europe must be upbeat about itself. There is whole range of reform measures which have to be done without delay. Having 17 governments and parliaments does not give Eurozone members any excuse for not taking any action. And this is the message… If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hard working. The incentive system, is totally out of whack. Why should, for instance, within [the] Eurozone some member’s people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair.”
NABILI: “You are speaking in many ways like one of the extreme capitalists of the United States. Are you suggesting that a hard line capitalist approach is where Europe should be going?”
LIQUN:“The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard.”
It was about this point in the interview that my head exploded.
Two questions come to mind:
- Why does it take one of the elite members of the leadership of a “Communist” country to articulate the problems in Europe with this kind of lucid precision? Why is this clarity completely lacking in either American or European leadership?
- Why do I have to go to Al Jazeera to see an interview with intellectual depth and real answers to questions about the nature of China’s perception of and possible participation in solving the European sovereign debt crisis?
I have no answers to those questions.
But when Jin Liqun finishes lecturing the Europeans, I’d like him to offer a few courses in capitalism and economic reality to our leadership in Washington D.C.
X-posted from “Divided We Stand United We Fall”