James Saft is a Reuters columnist. The opinions expressed are his own.
HUNTSVILLE, Ala. — Don’t count on the euro zone getting a leg up from the giants of the emerging markets.
The idea that Brazil, Russia, India and China will use some of their massive foreign reserves to buy up the bonds of weak euro zone countries has a certain symmetry, but it is unlikely to happen and even more unlikely to work if it does.
Brazilian Finance Minister Guido Mantega on Tuesday confirmed that the so-called BRIC nations will discuss help for Europe when they meet next week in Washington in the run-up to the IMF meeting on Sept. 24.
The idea, which is internally consistent at least, is that the exporting BRICs can save themselves pain if they step in where private investors are unwilling to and help to stave off a monetary union and banking crisis.
While you can bet the BRICs will use this possibility as a bargaining chip, as well they should, this is a crisis of insufficient global demand and too much debt and this particular maneuver will do little to nothing to address those issues.