The eurozone is on the verge of collapse. Another attempt to resolve the crisis has failed. The multiple loans generously provided by the IMF, the EFSF and the World Bank to the sick eurozone economies of Greece, Portugal , Ireland hasn’t made a miracle.
Brussels seems to be ready to accept aid from anywhere, even from those countries that are not its allies or friends to, say the least. One of them are the so-called BRICS states (Brazil, Russia, India, China, South Africa).
All of them are united by the dynamic pace of economic growth and considerable stabilization funds. Till autumn 2011 the EU was rather skeptical about BRICS. French, British and German mass media would often assault and criticized the informal union, its members and their relations. Later the situation changed when Brussels had to come back to earth and ask BRICS for help.
Autumn promises: How can BRICS help the eurozone?
As we have just mentioned, the BRICS countries can boast considerable gold-and-currency reserves. If combined, these are the world’s biggest reserves. China alone has accumulated a total of 3.2 trillion dollars. The biggest share of BRICS’s stabilization funds is represented by the Euro currency. This is what the EU authorities count on. For example, Russia stores 30-45% of its currency reserve in EUR. Brussels motivates BRICS by saying that in case the eurozone collapses this will be a devastating blow for their reserves.
Anticipating the EU’s intentions, the BRICS members were careful in their reaction. There was no common opinion. The main hope was laid on China as the EU expected it to contribute to the EFSF. China, as always, would make some ambiguous statements, saying it wishes the eurozone would be stable. Brazil, Russia and India were determined to help only specific eurozone economies (most successful – France and Germany) through the IMF only, not through the EFSF.
Later, during the G20 summit, which took place in Cannes in early November 2011, Europe was expecting financial aid without any conditions and gave everyone to understand that it would not tolerate patronage or moralizing. The rest were eager to teach the Old World a lesson and to express their own opinion on the EU’s financial policies of the recent years.
For example, Dmitry Medvedev, President of the Russian Federation, underlined that Russia was ready to help the EU through the IMF and that being a part of Europe, Russia was concerned about the situation in the EU and had the right to express its own standpoint.
Hu Jintao, President of China, was sure that the EU had enough strength to overcome the crisis while the rest of the world could help it.
Winter disappointment:
According to Eugene Olkhovsky, Masterforex-V Academy’s leading expert from Canada, today we can say that most of those hopes start disappearing.
BRICS’s fair promises haven’t still been converted into long-term loans or big-scale investments in the EFSF or European bonds. So far, China has been the only BRICS member that gave to understand that Europe shouldn’t count on any financial aid from China. The only thing they could do is to purchase a certain share of European bonds. Other BRICS states remain silent but that doesn’t matter anymore because without China their help will be inefficient.
Why did BRICS change their plans?
There can be a number of reasons, Masterforex-V Academy experts say:
· European countries try to avoid reforms and austerity
· Some experts believe that it will be next to impossible to cure the eurozone economies in the near future, which turns any financial aid into a waste of money.
· Europe doesn’t want to sell its most precious assets.
· BRICS can have their “personal” reasons, including internal problems and concerns (for example, the forthcoming presidential elections in Russia and the change of power in North Korea, China’s neighbor and ally)
EURUSD:
The experts of Masterforex-V Academy anticipate the following succession of events (as shown below):
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Will BRICS eventually help the eurozone?
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