Legend has it that the pied piper of Hamelin was hired by a town to purge their locality from rat infestation in 1284. The pied piper duly ensnared the rats with the tune of his piper and lured them all away into the Weser River. However the sting in the tale came when the inhabitants refused to pay back the promised sum to the piper and in turn invoked his fury-laden antagonism which eventually culminated in the pied piper baiting away the children of the town. With Eurozone bordering on a rat-plagued dominion, a south-east Asian piping giant has all the rhythmic force to drive away the rats. But is the panic-ridden Europe ready for the payback?
There are quite a few pipers that are being touted as Europe’s saviours. In fact if one were to traverse time dilations and move back in time, Europe has proven itself to be the battle ground for all sorts of piping rivalries. Although Uncle Sam has been piping all over the globe for the last hundred years or so, 1930’s Young Plan or 1947’s Truman Doctrine are a couple of melodies that bear an uncanny resemblance to the modern day scenario in Europe. Truman Doctrine, in particular, aided European cause after World War II’s aftereffects had taken their toll; and it proved to be a metaphoric stick used to ward off any communist penetration within Uncle Sam’s musically influenced realms. Now, just as the US flexed its economic muscle to enhance its hegemony over global matters back then, the gauntlet has been thrown towards China in 2011.
There are quite a few versions of the ‘Pied piper of Hamelin’ tale. One of them suggests that the piper amplified his demands, from those that were settled prior rat cleansing. Another version narrates the fact that it was actually the town residents who refused to pay after the pied piper had dug them out of their quagmire. Either way, Europeans should be wary of the repercussions that accompany any salvage act.
Beijing has been parrying away suggestions that it is willing to be Europe’s liberator-in-chief. But with Chinese stake in the global economic order and the fact that China itself has been the major beneficiary of such an order; Beijing might have to rethink its reluctance. China’s foreign exchange reserves tower above the rest, and hence their fortunes are intermingled with the rest of the world. Eurozone being Beijing’s most significant trading partner – with 20 per cent of the country’s total exports – connotes that its stability is of paramount importance to Chinese hierarchy. Chinese growth could drop by seven per cent and real GDP growth by one per cent, owing to a one per cent GDP decline in the European Union, according to estimates.
There’s no denying the fact that China has the wherewithal to conjure up a bailout package. But the real opportunity lies in investing in EU and enhancing domestic consumption of European products. The Asian pied piper has quite a few harmonies up its sleeve that might prove to be Europe’s lifeline. It can aid Europe bilaterally by back-stopping the stability facility. It could even purchase bonds from countries like Italy and Spain at generous rates or supply finance via IMF. In return China could reign supreme in financial matters, especially by augmenting its influence over IMF and its governance. However, what might pinch the Europeans is if the rescue act has a political tradeoff.
With China’s financial sway, the European payback was never going to be a strictly monetary matter – China’s European investment would inevitably have a pecuniary advantage, with or without Europe’s intent. However influencing political matters – like asking France to not invite Dalai Lama, or countering U.S decision-making in Italy – could be too big a price for Europe to pay. Salvation has a price tag, the people of Hamelin learned it the hard way; Europe wouldn’t want to follow suit.
The writer is Sub-Editor, Profit. He can be reached at [email protected]
