Expressing alarm at Europe's debt problems, Premier Wen Jiabao called on Greece, Spain and Italy to embrace budget cuts and get their finances in order after meeting yesterday with visiting German Chancellor Angela Merkel.

 

Wen said China is willing to keep buying European bonds but gave no sign Beijing will bail out the eurozone.

 

Merkel was in Beijing for talks aimed at boosting trade and allaying Chinese fears about Europe's heavy government debts. China has a stake in a resolution because Europe is its biggest export market and the nation holds billions of dollars in European bonds.

 

"The European debt crisis has continued to worsen, giving rise to serious concerns in the international community. Frankly speaking, I am also worried," Wen told reporters. He cited uncertainty over whether Greece leaves the eurozone and whether Italy and Spain take "comprehensive rescue measures," a reference to spending cuts and tax increases to balance their budgets.

 

"Resolving these two problems rests with whether Greece, Spain, Italy and other countries have the determination for reform," the premier said. "Resolving the European debt problem requires fiscal tightening and finding balance within individual economies."

 

Wen said China was willing to buy European bonds so long as it could evaluate the risks and to help the European Union, International Monetary Fund and European Central Bank - the so-called troika - support indebted eurozone countries "in overcoming hardships." 

 

Wen made a similar pledge of possible Chinese aid to European bailout funds during Merkel's last visit to Beijing in February.

 

The European Financial Stability Fund, set up to lend to troubled governments, says China and other Asian investors have bought 40 percent of its bonds but gave no other details.

 

Merkel told reporters that while the crisis is not over, countries such as Italy and Greece were "on an intensive road of reforms. I am convinced that this will bear fruit."

 

Greek politicians agreed this week on an austerity package demanded by creditors but were negotiating details. Inspectors from the troika are due in Athens next month for a review, on which hinges a rescue loan installment of 31 billion euro (US$38.9 billion).

 

"I want Greece to remain part of the eurozone," Merkel said. "I have at the same time indicated that credibility is very important in the eurozone. Therefore we expect the program to be implemented."

 

Ahead of Merkel's visit, German officials told reporters Berlin wanted to reassure Beijing that European debt is a "safe and good investment."

 

Later, Wen and Merkel presided at a signing ceremony for billions of dollars in business deals - a regular event during visits by European leaders.

 

Airbus Industrie, a unit of the French-German consortium EADS, committed to invest US$1.6 billion in the second phase of an aircraft final assembly plant opened in 2008 in Tianjin, Wen's hometown. Volkswagen AG, Europe's biggest automaker, signed a deal to invest US$219 million in an "environmentally friendly production facility" and vocational training initiative, also in Tianjin. Eurocopter, another EADS unit, signed an agreement to build a US$12.5 million production facility in China.

 

Officials of the two governments also signed agreements to collaborate in biotechnology, electric vehicles, agriculture, education, labor and the environment.

 

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