• Research
  • Emissary
  • About
  • Experts
Carnegie Global logoCarnegie lettermark logo
DemocracyIran
  • Donate
{
  "authors": [
    "Michael Pettis"
  ],
  "type": "other",
  "centerAffiliationAll": "",
  "centers": [
    "Carnegie Endowment for International Peace"
  ],
  "collections": [],
  "englishNewsletterAll": "",
  "nonEnglishNewsletterAll": "",
  "primaryCenter": "Carnegie Endowment for International Peace",
  "programAffiliation": "",
  "programs": [],
  "projects": [],
  "regions": [
    "China",
    "Western Europe",
    "Germany"
  ],
  "topics": [
    "Economy",
    "Trade"
  ]
}

Source: Getty

Other

Rescue from China?

The idea that there is a role here for China or other foreign entities—to lend foolishly to countries to whom the ECB or Germany are too skeptical to do so—simply indicates how confused the whole euro project has become.

Link Copied
By Michael Pettis
Published on Nov 21, 2011
Should China bail out Europe?
Michael Pettis
China cannot bail out Europe. There are two separate questions here. The first is whether Europe needs to be bailed out, and clearly the answer is that it doesn't. If Europe were suffering from a shortage of foreign currency—for example, if its external debt far exceeded its capacity to raise foreign currency—then it might be meaningful to discuss a bailout. But European entities have very little external debt compared to their capacity to raise foreign currency, so the whole question of a foreign bailout here is meaningless.

The second question is whether the peripheral countries need to be bailed out. The answer here depends on whether or not they are simply facing short-term financing gaps or whether they are truly incapable of servicing their obligations. If it is the former, then the European Central Bank (ECB) or Germany should step in and provide the funding. If foreigners do so, the euro must strengthen against the dollar and with it the European trade deficit will automatically widen and growth prospects in Europe decline. If it is the latter, then debts in the periphery should be restructured and partially forgiven. Otherwise, there is absolutely no way for peripheral Europe to grow its way back into health. The idea that there is a role here for China or other foreign entities—to lend foolishly to countries to whom the ECB or Germany are too skeptical to do so—simply indicates how confused the whole euro project has become.

About the Author

Michael Pettis

Nonresident Senior Fellow, Carnegie China

Michael Pettis is a nonresident senior fellow at the Carnegie Endowment for International Peace. An expert on China’s economy, Pettis is professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets. 

    Recent Work

  • Commentary
    Is China’s High-Quality Investment Output Economically Viable?

      Michael Pettis

  • Commentary
    What GDP Means in a Soft Budget Economy Like China

      Michael Pettis

Michael Pettis
Nonresident Senior Fellow, Carnegie China
Michael Pettis
EconomyTradeChinaWestern EuropeGermany

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

More Work from Carnegie Endowment for International Peace

  • Europe from Scratch: Visions for a New European Order
    Report
    Europe from Scratch: Visions for a New European Order

    As the EU confronts profound challenges, several leaders have called for fundamental reform to the union’s model—but only modest, superficial changes have resulted. What if Europe really could be reimagined from zero today: What should such a redesigned European order look like?

      Richard Youngs, ed.

  • Paper
    Egypt’s Military Landlord Economy and its Limitations

    The armed forces champion a form of capitalism that is generating revenue, but its reliance on rent faces diminishing returns, leaving the country with massive sunk costs and deferred returns, deepening dependency on external borrowing.

      Yezid Sayigh

  • Article
    From Hormuz to the Maghreb: The Geopolitical Reach of a Gulf Crisis

    Morocco and Algeria, each in its own way, are having to navigate the global economic fallout of the U.S.-Israeli military campaign against Iran.

      Yasmine Zarhloule

  • Aerial view of Washington DC
    Paper
    Network and Structural Power: The Four Trend Lines Weakening U.S. Leverage

    Networks—from international payments platforms to key economic sectors—underlie many aspects of U.S. power. But they are suffering under an extractive approach to foreign policy.

      Daniel W. Drezner

  • Paper
    Threading the Needle: India’s Path Forward with China

    After the chill in ties between 2020 and 2024 that brought India–China relations to their lowest point in several decades, the two countries have engaged each other afresh. This paper argues that there are predominantly four imperatives guiding India’s approach to China, and they exist in an order of priority.

      Saheb Singh Chadha

Get more news and analysis from
Carnegie Endowment for International Peace
Carnegie global logo, stacked
1779 Massachusetts Avenue NWWashington, DC, 20036-2103Phone: 202 483 7600
  • Research
  • Emissary
  • About
  • Experts
  • Donate
  • Programs
  • Events
  • Blogs
  • Podcasts
  • Contact
  • Annual Reports
  • Careers
  • Privacy
  • For Media
  • Government Resources
Get more news and analysis from
Carnegie Endowment for International Peace
© 2026 Carnegie Endowment for International Peace. All rights reserved.