While until last week, members from BRICS group looked reluctant (apart from Brazil) to play a significant role in current euro zone crisis, it now appears that BRICS might well rescue struggling economies.
In the latest G20 meeting in Washington which ended last week, members of BRICS group said that they are considering providing funds through the International Monetary Fund or other financial institutions to help get growth in developed countries back on track. The BRICS countries in joint statement reiterated that they want some decisive action, a permanent solution in euro-zone; nonetheless, the group did not offer any immediate and specific financial support.
In a communiqué, the group also expressed that their intentions to work in a synchronized way among themselves (BRICS countries) in order to support the euro zone and aiding the global economy. Nevertheless, the statement also made clear that the group needs a wider range of discussion, possibly with G-7 [Group of Seven] G-20 [Group of 20] or [during] other occasions.
For more than a week, policy makers were speculating about what the BRICS countries could do to help Europe stem its sovereign debt crisis.
BRICS is considered as an important funding source because of large amount of dollar reserves.
With more than $4 trillion of ideal cash reserves, mainly owned by China, there has been talk of the BRICS economies investing in euro zone sovereign bonds.
Meanwhile, China after initial hesitance has shown intent in the euro zone rescue mission. Chinese officials say Beijing will carry on giving marginal support to Europe through its continuing investments there and efforts to diversify its holdings in foreign currency reserves. At present, almost a third of China’s foreign currency reserves are in euros.
Back in 2008, the group of 20 biggest industrialized and developing economies worked in coordinated manner to ease the global financial crisis. Now, BRICS leaders say they are looking for a similar effort to materialize in the coming weeks.
Besides, pledging financial support, the communiqué has also stressed that looking at current trends where BRICS has become major economic muscle; the world (especially the U.S and Europe) should allow these countries to have bigger say in global matters. Also, the statement voiced concern over the slow pace of quota and governance reforms that the IMF approved last year.
According to the International Monetary Fund estimations, Brazil, Russia, India, China and South Africa will jointly amount for 60 percent of the world’s global economic growth by 2014.