Former British prime minister Tony Blair, who is the Middle East Quartet envoy, talks to China Daily reporters on Saturday. Wang Jing / China Daily

Ex-British PM on China's eurozone aid and secret talks with Gadhafi

BEIJING - European leaders should show a credible commitment to stand behind the single-currency system and resolve the ongoing crisis, a prerequisite for China's help, Tony Blair said on Saturday.

"Now is really the last chance for decisive leadership (in Europe). (It's) time for action," said the former British prime minister in an exclusive interview.

"I have no doubt China is prepared to help, but it only helps if Europe gets its act together. There's no Chinese action that can substitute European action," said Blair, who was visiting Beijing to meet with Vice-Premier Wang Qishan to discuss global economics, eurozone debt and the Middle East crisis.

To preserve the euro, he said leaders must show the "whole weight of the European economic system will stand behind the single currency ... whether that can be done through the European Financial Stability Fund, the European Central Bank or can be done in a number of different ways".

Battered by market jitters, bond yields rose in almost every eurozone country last week, indicating growing investor concerns, while Germany failed to find enough bids for a 10-year bond auction.

As a result, the S&P 500 - an index that tracks the prices of the 500 largest public companies in the United States - saw its worst weekly performance in two months and fell for a second straight week.

"The situation in the eurozone appears to be going from bad to worse," Paul Sheard, global chief economist of Nomura Securities International, wrote in a research note.

"The problem is that the 17 eurozone countries do not appear to have the willingness and capacity to agree upon and implement the right form and necessary amount of fiscal union fast enough to calm markets, and this failure threatens to push the eurozone ... toward disorderly disintegration."

Seeming to answer the markets' call for action, German Chancellor Angela Merkel and French President Nicolas Sarkozy are reported to be pondering more drastic measures, including a new Stability Pact, to stem the crisis, German newspaper Welt am Sonntag quoted German government sources as saying on Sunday.

Previous reports suggested China would extend a helping hand to Europe, as it has a large pile-up of foreign exchange reserves, as much as $3.2 trillion. However, Chinese officials and policy advisers have expressed concerns that the situation may be too risky if European policymakers fail to devise a workable rescue plan.

"We can't say that we are not 100-percent committed but want Chinese commitment instead," Blair told China Daily. "The Chinese government has to look after the money of the Chinese people, so it has to be careful."

The 58-year-old, who stepped down from power in 2007, also urged China and the West to iron out their differences, such as those surrounding trade frictions, in a more cooperative way to push stable global economic growth.

"We should be seeking to understand each other's problems and trying to work them out," he said. "What is important is not to escalate (trade frictions). That's dangerous."

Gadhafi links

Turning to talk about the Middle East, Blair categorically denied media claims he held secret talks with Muammar Gadhafi before the Libyan leader was ousted this year.

"I did not (hold private talks with Gadhafi)," said the official envoy of the rescue plan Quartet, a group established to mediate in the Israeli-Palestinian conflict. "I actually did visit Libya several times after I left office (as prime minister). I think I visited once in the two years before (Gadhafi) fell."

Blair has come under intense fire in Britain over his administration's ties with the Gadhafi family. Several media reports have claimed that the recent capture of Gadhafi's British-educated son, Saif al-Islam Gadhafi, will result in embarrassing details coming to light about how close the British government was with the former Libyan regime.

"(Saif al-Islam's case) is now in the hands of the Libyan government and the International Criminal Court. They should be allowed to just get on with their work," Blair said without elaborating.

In London last week, Labour's finance spokesman Ed Balls defended his party's actions, saying Blair and his successor Gordon Brown, as well as intelligence experts at the time, considered talks with Gadhafi on disarmament "a positive step forward".

Blair on Saturday said: "I hoped the change in external policy in Libya would be matched by an internal policy change and a reform program, but it didn't happen."

Gadhafi, who stopped Libya's nuclear program shortly after the US-led invasion of Iraq in 2003, ruled for 42 years before he was killed in October during a NATO-backed campaign to overthrow him.

His fall, according to Blair, was due to his refusal to reform.

"When they didn't follow a program for evolution, they ended up with revolution," he said. "So the lesson is very clear to that region: engage and study evolution, because otherwise you'll get revolution."

The peace envoy said he prefers evolution over revolution, explaining that "as we've found out in Egypt and elsewhere, revolution also has its problems".

Egypt is one of several nations that have seen regime changes since the start of the Arab Spring. However, efforts to stage open elections since the resignation of president Hosni Mubarak in February have not gone smoothly, with continued protests over the involvement of the military.

"To change these regimes, you have to ask what will come in their place, which is actually a hard question," Blair said. "We need to be engaged in trying to help the process of change come about in a way that results in the genuine modernization of these countries.

"All over the Middle East, you have elements that are, frankly, very reactionary."

Sources say that during his meeting with Vice-Premier Wang Qishan on Friday, Blair warned of a mounting risk of Israel launching a military campaign against Iran.

Blair refused to comment on the matter on Saturday, saying only that the "risk of a nuclear-armed Iran is significant".

"That's why I hope the actions we're taking in the international community can, by diplomacy, resolve this," he added. "If not, there's going to be some very difficult choices. I still believe it's possible to resolve this peacefully."