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EU chief says China still has confidence in euro

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Published: April 30, 2010 4:08 a.m.
EU chief says China still has confidence in euro

BEIJING – The European Commission president said Friday that China still has confidence in the euro, despite a plunge in the European currency as negotiators work toward a financial bailout for Greece.

"I don't think China is lacking confidence in the European Union or the euro," Jose Manuel Barroso, head of the 27-nation European Union's governing body, told reporters after meeting with China's premier and other officials.

Beijing has refrained from commenting publicly on the euro but it keeps an estimated 20 percent of its $2.5 trillion in foreign reserves in assets denominated in euros.

Barroso said Premier Wen Jiabao and other officials did not raise any specific concerns about the currency. But he said, "They are following the issue."

European negotiators are close to agreement on a bailout for Greece and he expects results "very soon," he said. "There is no doubt that Greece's needs will be met in time."

Barroso said he and Wen had wide-ranging discussions Thursday about global economic imbalances, climate, cooperation in clean energy and other areas.

He said he brought up China's currency but stressed that he was not trying to pressure Beijing. China's trading partners want it to loosen controls they say keep its yuan undervalued and give its exporters an unfair advantage. Analysts say Chinese leaders might delay action for fear of being seen as giving in to foreign pressure.

"It makes sense to discuss currency stability and of course the level of the appreciation of the currency of China," Barroso said. "I think that message was clearly understood and seen clearly as different as what may be perceived as a kind of pressure."

Barroso said he could not comment on the movement of currencies when asked whether the euro's weakness due to the debt crisis might prompt Beijing to postpone any action on allowing the yuan to rise.

China has tied the yuan to the dollar since late 2008 to help its exporters compete but is under pressure from Washington and others to loosen its controls. Analysts expect Beijing to allow a gradual rise this year to ease strains on its economy but say that might be postponed due to the European turmoil.

European officials have been assuring markets they were working quickly on approving a bailout for Greece as they try to keep its debt crisis from dragging others into a continent-wide financial meltdown.

Some analysts warn that Greece might have to drop out of the euro. The Greek government says it needs a bailout to pay 8.5 billion euro in bonds due May 19.

"The difficulty that we have been facing now in Greece and also due to the fiscal position in some of our member states are going to be overcome," Barroso said. "I have no doubts about the solidity of the euro."

Barroso was due to fly to Shanghai later Friday to attend the opening of the 2010 World Expo and meet with Chinese President Hu Jintao.

Barroso said he avoided canceling or postponing his China trip due to the crisis because Beijing is an important trade and financial partner. He said he was in "constant contact" with EU headquarters in Brussels.

"I think it would be a complete mistake to change my program," he said. "It would give the wrong signal."

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