South Africa cannot really play a role in assisting the Eurozone out of its debt crisis, Reserve Bank governor Gill Marcus said.
“My own approach would be that it needs the Group of 20 as a whole to look at what needs to be done, because it is not for us to plug gaps,” Marcus was quoted as saying in Business Day on Thursday. “There has to be a coherent strategy, a coordinated approach and they have got to take the decisions. We can’t solve Spain or Italy. It is their job.”
She warned that any plan involving the Brics nations – Brazil, Russia, India, China, South Africa – to help the Eurozone resolve its crisis needed to be “looked at very carefully”. “I think you can’t just have something which says this is something which we can do,” Marcus said on Wednesday while briefing Parliament’s finance committee on the South African Reserve Bank’s annual report.
“Our reserves are nothing like China’s. China’s are in the trillions, we have $50-billion.”
Prior to a meeting of leading emerging market economies in Washington last month, Brazil’s finance minister Guido Mantega said the Brics would consider what they could do to help the Eurozone. When Finance Minister Pravin Gordhan returned from that meeting, he said every country had to contribute to resolving the financial crisis in the Eurozone. “There was a recognition that we are all in this together… even the Brics countries can’t set themselves apart from the solution,” he told media at the time.
Gordhan said there was recognition at the meeting that no one wanted the contagion from the Eurozone to damage other economies around the world. It was key, however that Europe should take the lead and give effect to the bail-out packages it had decided on, on July 21, he said.
However, all countries, possibly through the International Monetary Fund (IMF), needed to ensure that international agencies had sufficient “firepower” to resolve the crisis, he said. This could mean substantially increasing the $400-billion the IMF now had, so it could play a more active role in resolving the crisis.
“Then each of the members of the IMF… will have to make a contribution to that… for us [South Africa] that means a couple of hundred million dollars,” Gordhan said. “Some of the calculations floating around in Washington… [are] that if this crisis spreads to Italy and Spain, you’d need over $2-trillion to be able to intervene within that environment.”
Marcus also told Parliament’s finance committee the world would have to live with slow growth for a long time. South Africa would have to navigate a “very, very difficult and dangerous” environment. The SARB felt current conditions were so severe they would be “enormously difficult” to manage even without a recession, according to Business Day.