Interview: Chinese ambassador mentions structural reform in Greek debt crisis

09:41, July 25, 2011      

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Structural reform and privatization are part of the keys to solving the prolonged debt crisis in Greece, said Chinese Ambassador to Greece Luo Linquan in a recent interview with Xinhua.

"The debt crisis has exposed the structural problems in the Greek economy, it is therefore a must for the country to carry out structural reform and push forward the privatization process," said Luo.

Luo said the current debt level in the country is unsustainable, and whether or not Greece can decrease its debt level is a grave problem facing its government, he said.

Luo said the Greek debt crisis ensued the global financial crisis, and it is therefore natural for it to see some overreaction.

As a result, Greece's bond rating was downgraded to a 'junk' status, and the liquidity of its banking systems which has been reliant on aid loans from the European Central Bank (ECB) was cut off.

"The financial crisis was mixed with the vulnerability of its financial system and the potential crisis of its banking sector, making the crisis quite complicated and difficult to deal with," said Luo.

Luo said the Greek government is now trying to raise taxes and cut spending. But with the economic recession going on, it's not easy to raise enough taxes as expected while cutting expenditure discourages consumption.

Meanwhile, the lack of liquidity in the banking sector discourages investment. These factors are all affecting the recovery of the Greek economy.

However, in Luo's opinion, Greece's counterparts in the eurozone will not allow the Greek debt crisis to deteriorate and spread to other eurozone countries.

This prediction was proved right as European leaders agreed to lend Greece a further 109 billion euros (about 155 billion U.S. dollars) to solve its debt crisis on Thursday.

In terms of the crisis' impact on China, Luo admitted that there was some negative impact on the bilateral trade, but only to a very limited extent.

On the other hand, Luo said opportunities usually come abreast with with risks.

The structural reform or privatization could reshuffle its infrastructure sector including transportation, new energy, electricity and water supply, which might provide a good chance for foreign enterprises.

Source: Xinhua
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