U.S. plays down European crisis but China worried

The US suggested Europe’s debt crisis would have minimal impact on global growth, but China took a more pessimistic view, warning it would impact demand for its exports and other regions would suffer too.

CHINA

The two countries, meeting in Beijing for high-level talks, set the differing tones as eurozone leaders sought to conquer doubts that they can cut fiscal deficits and stimulate growth to overcome the crisis.

Global markets have been gripped by fears that a debt crisis engulfing Greece will spread to other highly indebted nations, particularly in southern Europe, dragging down the continent’s economy and hitting trade with the United States and Asia.

“The euro zone problems haven’t been cleaned up yet,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

“And even though the global economy is definitely showing more signs of recovery than it did 6 months ago, worry continues that the euro zone’s woes will put a brake on this growth.”

Greece’s prime minister on Sunday ruled out defaulting on payments or restructuring its debt and his Spanish counterpart vowed to push through an austerity plan despite union threats to strike.

In Beijing, where officials from the world’s No.1 and No.3 economies were meeting for U.S.-China Strategic and Economic Dialogue, there were contrasting messages about the dangers Europe’s woes posed to the global recovery.

U.S. Treasury Secretary Timothy Geithner, who flies to Europe on Tuesday for talks in Britain and Germany on stabilizing the continent’s economy and financial markets, said on Monday the global economy had been strengthening faster than expected.

At the weekend, a senior U.S. Treasury official, who declined to be identified, had said the European crisis would have minimal impact on the world economy.

China’s state planning commission seemed less optimistic, saying on Monday that the crisis would affect demand of Chinese goods. On Sunday, Finance Minister Xie Xuren had warned that Europe’s debt woes could hit other regions.

“At present, risks from European sovereign debt have increased factors of instability in the course of global economic recovery,” Xie wrote an essay published in the Washington Post and on his Ministry’s website (www.mof.gov.cn).

Some analysts suggest China may delay letting its yuan currency rise in value — as Washington has urged — out of concern that its exports to Europe will suffer.  Click here for full story from Reuters….