Greek referendum risks market panic: China commentary

Greece's unexpected referendum call on the EU bailout plan risks creating financial panic and spreading debt problems if Greeks turn down the deal, China's official Xinhua news agency said in a commentary published on Wednesday.
The Xinhua piece does not necessarily represent the official view of Beijing. But it showed that cash-rich China, which is being courted by Europe to contribute to the bailout plan, is deeply wary of the euro sovereign debt crisis.

"In the referendum, the Greek general public who were repeatedly forced to tighten their belts may throw their anger at the (EU's) bailout plan," Xinhua noted.

"If the referendum result is 'no', then rescue efforts will come to a stop, a Greek default will happen, financial markets will fall into panic, and the euro sovereign debt crisis will spread -- the crisis will go beyond Europe," it added.

Greek Prime Minister George Papandreou on Monday called an unexpected referendum on a new EU bailout deal for his debt-ridden country, a move that could prompt snap elections if a public angry at austerity rejects the terms.

Xinhua said the sudden announcement from Greece demonstrates that deep-rooted political flaws underlay the euro zone crisis.
"It will be a chronicle crisis, with intertwining political and financial problems, to last for a long long time," Xinhua said in the article which is available on its website ( here ).

The Chinese government, with $3.2 trillion foreign exchange reserves -- about a quarter of which are estimated to be held in euro-denominated assets -- has yet to make clear public commitments to aid the EU, its largest trade partner, although it has repeatedly made general expressions of confidence in Europe.

Chinese President Hu Jintao, who is visiting Europe now, said he believes that Europe can overcome its problems on its own.
In a separate opinion piece, Xinhua said the call for a referendum has raised important questions.

"How to proceed with the EU bailout plan from now to early next year? If the Greek referendum turns down the deal, what next?"


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