布鲁盖尔-Don-t-let-the-euro_7页_570kb

ASIA-EUROPE ECONOMIC FORUM: Don't Let the Euro-Area Crisis Go East

Core Content

This paper, published by the Asia-Europe Economic Forum in January 2012, examines the potential spillover effects of the euro-area crisis on Asian economies and discusses the importance of Asian involvement in addressing the crisis. The authors, including economists from CEPII, IWEP, ADBI, and Bruegel, emphasize the interconnectedness between Europe and Asia and the need for a coordinated approach to ensure global economic stability.

Main Views

• Economic Impact of the Euro-Area Crisis on Asia:
  The euro-area crisis poses a new risk for Asian economies, particularly through financial and trade channels. Asian economies are heavily reliant on trade financing provided by European banks, and a decline in euro-area demand could significantly affect exports. Additionally, the crisis may spread to emerging markets via financial contagion, especially if European banks start withdrawing funds from Asia.

• Key Asian Export Markets:
  The euro area accounts for 9–17% of Asian goods exports, making it a crucial market. China, in particular, is highly dependent on Western demand, which makes it especially vulnerable to a slowdown in the euro area.

• Financial Linkages:
  European banks hold a significant share of foreign claims in Asian countries, especially in Hong Kong and Singapore. A potential withdrawal of these funds could have severe implications for Asia's financial stability.

• Importance of the Euro for Asia:
  The euro offers an alternative to the US dollar for diversifying Asian foreign exchange reserves. A stable euro is also essential for maintaining a multipolar international monetary system, which is important for the balance of economic power in the long term.

• Regional Cooperation and Integration:
  The euro area's crisis has implications for Asian monetary integration efforts. As the most advanced model of regional cooperation, the euro area provides a useful reference for Asia in terms of macroeconomic coordination and policy alignment.

Key Information

• GDP Impact During the Global Financial Crisis:
  From 2007 to 2009, Asia experienced significant GDP declines:

  • Japan: -8.6 pp
  • China: -5 pp
  • Korea: -4.8 pp
  • ASEAN-5: -4.6 pp

• Euro-Area Financial System Vulnerabilities:
  The crisis has evolved into a systemic financial issue, with sovereign debt and banking systems interconnected. The ECB, despite its monetary policy interventions, lacks the authority and governance structure to effectively address the crisis.

• IMF's Role in Crisis Management:
  The IMF is seen as a more credible institution for Asian investment in European crisis support, as it provides oversight and conditionality. This is in contrast to the European Financial Stability Facility (EFSF), which lacks sufficient credibility.

• Asia's Potential Contributions:
  Asian countries can contribute to the stabilization of the euro area, but they require guarantees and incentives. This could include enhanced representation in the IMF or a more formalized regional fund linked to the ESM.

• Policy Recommendations:

  • Enhance IMF Governance: Asian countries may demand greater representation and voting rights in the IMF to ensure their interests are protected.
  • Strengthen Regional Cooperation: The ASEM (Asia-Europe Meeting) needs to be more active and institutionalized to facilitate regular dialogue and cooperation between Asia and Europe.
  • Promote Trade and Investment: Asian countries should consider supporting the solvency of European banks and investing in the ESM to ensure financial stability and growth.

Conclusion

The euro-area crisis has significant implications for Asia, both economically and politically. While Asian countries are not the primary source of the crisis, they are vulnerable to its spillovers. Therefore, Asia has a stake in the euro's survival and should be involved in the solution. A multilateral framework, particularly through the IMF, is seen as the most effective way to ensure cooperation and stability. However, a more structured and institutionalized dialogue between Asia and Europe is necessary to foster long-term economic cooperation and integration.

References

• Angeloni, Ignazio, Agnès Bénassy-Quéré, Benjamin Carton, Zsolt Darvas, Christophe Destais, Jean Pisani-Ferry, André Sapir and Shahin Vallée (2011) Global currencies for tomorrow: a European perspective, Blueprint 13, Bruegel
• Haizou Huang (2011) Euro-area crisis and its impacts on EMs and China, presentation at AEEF, Seoul
• Pisani-Ferry, Jean (2012) The euro crisis and the new impossible trinity, Policy Contribution 2012/01, Bruegel
• Yu Yongding (2011) Beijing will not ride to Eurozone rescue, Financial Times, 31 October

Notes

• The paper highlights the importance of financial stability in the euro area and its implications for Asia.
• The authors stress that Europe must take the lead in addressing its own crisis before seeking external support.
• The role of the IMF in providing a credible framework for Asian involvement is emphasized.
• The paper suggests that Asia should not be expected to provide aid without corresponding benefits or guarantees.