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Will the NPC ride to the UK's rescue? (2)

By Mark Hughes (China Daily)

08:24, March 13, 2012

Late last year, the UK's Bank of England governor, Sir Mervyn King, issued what many observers described as an apocalyptic warning. He said: "An erosion of confidence, lower asset prices and tighter credit conditions are further damaging the prospects for economic activity and will affect the ability of companies, households and governments to repay their debts. That, in turn, will weaken banks' balance sheets further. This spiral is characteristic of a systemic crisis."

Many commentators have suggested there is a pact between the two most powerful leaders in the 17-nation eurozone, German Chancellor Angela Merkel and French President Nicolas Sarkozy, a sort of Merkozy some observers joke, that will see changes to the EU treaties that will make it less democratic and abolish member countries' vetoes in the interests of greater fiscal unity and central control.

UK Prime Minister David Cameron, while no doubt counting his blessings that Britain never signed up to the euro and maintained sterling as its currency, is reported to fear Britain being sidelined by the Merkozy pact.

Cameron and his team of ministers, not so long ago described on Chinese television as the "young men quietly getting on with cutting the UK's budget deficit", are keen to reduce UK government spending. The EU has a "bloated welfare system that meant people in Europe did not work enough", the head of the Chinese sovereign wealth fund was quoted as saying on Al Jazeera television English language news channel.

In an apparently well briefed report in the Financial Times, it was stated: "Ms Merkel and Mr Sarkozy have promised to submit joint proposals for EU treaty changes on that score although they have yet to agree on some critical questions, such as whether sanctions should be automatic for rule-breakers."

The problem for China is that the EU has form in being protectionist, and the world is entering an increasingly protectionist phase as harsh economic conditions bite. China is now the EU's second trading partner behind the US and the EU's biggest source of imports by far.

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