It seems a little odd that the final countdown to a Greek default saw the clock run out on what was in reality a puny payment. Greece was due to pay the International Monetary Fund a mere 1.55 billion euros Tuesday, by itself a rather inconsequential sum in the global credit markets. Athens’ inability to pay that small amount set off the chain of events that put global markets on high alert and continues to threaten the decades-old project of European integration.
While Greece has held testy exchanges with creditors from the IMF, the European Commission and the European Central Bank over the past five years, other countries with financial difficulties have been borrowing massive amounts from other sources, notably China, a country that holds some $4 trillion in foreign currency reserves. Compared to the heft of China’s holdings, the Greek payment barely qualifies to be called a crumb.
China has used its vast cash reserves to fund other governments that have defaulted on their sovereign debt, including Argentina and Ecuador. In the past decade Beijing has loaned almost $120 billion to Latin American nations, and that doesn’t include financing for long-term projects such as the wildly ambitious transoceanic canal in tiny Nicaragua, whose price tag is estimated at $500 billion. Countries whose economic policies send potential lenders fleeing in horror receive generous lines of credit from Beijing. Venezuela, for example, has borrowed more than $56 billion from China.