China Could Give $100bn To Euro Bailout Fund

China could come to the rescue of the eurozone by contributing around $100bn to its bailout fund, it has been suggested.

Two senior advisers to the Chinese government told the Financial Times it was "very likely" to put money into the European Financial Stability Fund (EFSF).

But they say any contribution would have to be given strong guarantees and would depend on the input from other countries.

Li Daokui, an academic member of China's central bank monetary policy committee, told the paper: "It is in China's long term and intrinsic interest to help Europe because they are our biggest trading partner.

"But the chief concern of the Chinese government is how to explain this decision to our own people.

"The last thing China wants is to throw away the country's wealth and be seen as just a source of dumb money."

The reports came after French president Nicolas Sarkozy and Chinese leader Hu Jintao spoke on the phone on Thursday and pledged to cooperate to revive global growth.

The fund's chief executive is due to visit Beijing on Friday to talk to potential investors.

Beijing has so far only expressed sympathy for the EU but has not committed any cash and only pledged to help by continuing business as usual.

Earlier, Chancellor George Osborne said the debt deal struck by eurozone leaders is "much better than expected" - but that Europe should not expect additional bailout cash from Britain.

In a statement to the House to Commons, George Osborne stressed that the UK would not pay directly or via the International Monetary Fund (IMF) to boost the size of the eurozone rescue fund.

He said there could be a case for increasing support to the IMF, but added: "We would not be prepared to see IMF resources reserved only for use by the eurozone."

The Chancellor also confirmed that no British bank was required to hold extra capital under the terms of the new agreement.

Eurozone leaders announced their plan after all-night talks, and appear to have convinced markets they have an effective response to the growing economic crisis.

Britain's FTSE 100 closed 2.9% higher following the outline of the deal overnight, while there were even stronger rises on other European markets.

Officials in Brussels said an accord had been reached with banks on a 50% write-off of 100bn euro of Greek debt.

They have also approved a complex mechanism for "leveraging" an existing bailout fund to boost its firepower.

Reluctant banks had offered a 40% 'haircut', but German chancellor Angela Merkel and French president Nicolas Sarkozy insisted that the sector had got off relatively lightly in the crisis so far, with taxpayers bearing the brunt of bailouts.

They said banks should be prepared to forgo a significant level of Greek repayments to help ease the crisis.

It means that, coupled with an earlier decision to recapitalise vulnerable banks, the summit has delivered on the package it promised.

It was also agreed on Wednesday to increase the 440bn euro (£386bn) bailout fund, perhaps to over 1trn euro (£876bn).

This would help protect larger economies such as Italy and Spain, where financial markets also welcomed the deal, from the economic turmoil that has already pushed three countries to need bailouts.

Although no figures are included about the size of the bailout, experts are already warning that the recapitalisation, obliging some banks to boost liquidity by 100bn euro (£87.6bn), will not be enough.

EU President Herman Van Rompuy said the deal will reduce Greece's debt to 120% of its GDP in 2020.

Under current conditions, it would have grown to 180%.

Greece's prime minister George Papandreou said the deal heralded a "new era" for his country.

Meanwhile, European Commission president Jose Manuel Barroso said: "These are exceptional measures for exceptional times. Europe must never find itself in this situation again."

Mr Sarkozy told reporters: "We have reached an agreement which I believe lets us give a credible and ambitious and overall response to the Greek crisis.

"Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide."