Don't Bet on the BRICs

In their Oct. 26 plan to resolve the Continent’s debt crisis, European leaders pledged to increase the size of the euro zone’s bailout fund from €440 billion ($604 billion) to €1 trillion. The money won’t come entirely from Europeans themselves. Responding to Western requests, Chinese officials are considering whether to contribute some of their $3.2 trillion in foreign currency reserves to the European Financial Stability Facility or possibly a new bailout mechanism set up by the International Monetary Fund. China also has signaled interest in investing in Greek infrastructure and buying up some of Athens’s debt. As Theodoros Pangalos, Greece’s Deputy Prime Minister, told reporters, “The Chinese deal in real things, in merchandise. And they will help the real economy in Greece.”

Beleaguered world leaders, corporate executives, and ordinary investors are looking to emerging powers—Brazil, Russia, India, and China (the so-called BRIC nations), and others like South Africa and Indonesia—to help revive the global economy. While the West is struggling, the rest are booming: Indonesia’s economy grew by 6.1 percent last year; Turkey expanded by 9.2 percent; India grew by 8.5 percent. At an October meeting of Group of 20 finance ministers, Brazil and other new powers proposed increasing their contributions to the IMF so that it would have more money to aid Europe and other indebted regions. Turkey has used its resources to promote liberalization in the Arab world. And Brazil and Russia, like China, are weighing the prospect of purchasing sizable quantities of European nations’ sovereign debt.