By Nolan Warner

The October 27th crisis summit brought Europe's powers together to create what was later deemed a “comprehensive package” to stabilize the Euro-Zone, but many are concerned that it will not be nearly enough. While some, including many of those who helped conceive it, hail it as an unprecedentedly effective and thorough plan that will help to ensure both short and long term stability, others see huge and potentially crippling flaws. Certainly, not all Greeks support the package (the political drama currently unfolding among the nation's leaders would likely be considered a tragic work of art, were it a theater production). As debate sparked by the summit continues to spread and intensify between European and foreign observers alike, large scale consensus is, as always, unlikely. But what any and all spectators of the world stage can agree on is that some influential Europeans may very well be considering China as a way out of the current debt crisis.

There is no shortage of evidence backing this speculation; just after the recently held summit in Brussels, French president Nicolas Sarkozy called Hu Jintao, his opposite number in China. Of course, such a call does not warrant the dealing of an absolute by speculative economists, seeing as world leaders communicate on a regular basis about any number of issues. What makes this call suspicious to those whispering about a European distress call to China, however, is not only it's close proximity to the summit, but also European Financial Stability Facility (EFSF) head Klaus Regling's trip to Beijing a day later. Further, the belief that European and Chinese leaders are discussing investment is simple common sense, as well as historical awareness. Greece, Portugal and Spain have all had talks with the Chinese regarding investments, albeit with no great success.

So what are the possibilities and probabilities surrounding potential deals to be made between Europe and China? Well, consider the substantial investment power currently held by China; its foreign exchange reserves stand at an estimated (and whopping) 3.2 trillion USD. China also trades more with the EU than any other trade partner, and it's estimated that around 25% of said reserves are composed of Euros, which gives China quite a good reason to help maintain the integrity of the currency. Also consider the differences between the current possibility of an EU-China deal and those of the past. The collective Euro is of course stronger and more influential than the sovereign shares on which past talks were centered, and is of course a hugely powerful currency, despite the staggering global market and threat of financial collapse. That said, the EFSF ensured risk for China in investing would be lower than that of the Europeans, were a deal to be brokered.

These things help boost the probability of a deal, but they don't nearly secure it. As things stand, any kind of political bargain between the EU and China is extremely improbable. All China could hope to gain from such bargaining would be market-economy status, or possibly representation in the International Monetary Fund (IMF.) Seeing as those achievements are almost undoubtedly down the road for China anyway, there is no reason for the Chinese to throw money into Europe during anything less than a total economic emergency. Needing such political rewards in exchange for cash is not commercially appealing to China, and Europe can't claim that Italian and Spanish debt is a safe investment while making such desperate offers to the Chinese.

Don't make the mistake of thinking that no kind of agreement can be reached; it's entirely plausible that the Chinese will pump some money into the Euro-Zone. Joint investment in a thick junior tranche of an SPV, further protecting private investors, is also an option. Both of these possibilities are far from certain, but they're infinitely more likely than China spending enough to save the Euro.