You're reading: Euro zone needs a plan before Russia can help

MOSCOW, Sept 14 (Reuters) - Europe must come up with a clear strategy on how to save its debt-ridden states before Russia can make a commitment to increase its holdings in the euro zone, President Dmitry Medvedev's chief economic adviser told Reuters on Wednesday.

"We would like to know what actions will the European Union take itself, what scenario will they opt for: a default on Greek debt default or no default? Whom will they help: banks or governments?" Arkady Dvorkovich told the Reuters Russia Investment Summit.

"We should know what will happen before we make any decision. Without this information, a decision on a substantial increase of holdings is not possible. For now, we have no clarity."

Dvorkovich, the government’s sherpa to the Group of Eight industrialised countries, said he had seen no proposals from other BRIC countries at a presidential level to offer support to the euro area.

Speaking to Reuters Insider television, he said the more appropriate forum for addressing the euro zone crisis would be the Group of 20, which includes leading developed and emerging economies, at summit talks in France in two months.

"These issues will be discussed within the G20 circle in November in Cannes. I think the leaders of Europe, the United States, China, Russia and other countries — all BRIC countries — will find a coordinated approach to stabilize the situation," Dvorkovich said.

RUSSIA MAXED OUT

Russia, the holder of the world’s third-largest gold and foreign exchange reserves, already holds 45 percent of the $543 billion stash in euro-denominated assets.

That, finance minister Alexei Kudrin told Reuters on Tuesday, meant the central bank had no room to increase holdings of euro zone debt at will.

"As soon as you see our gold and forex reserves rising by $10 billion, you can assume that $4.5 billion is invested in euro zone countries’ bonds," Kudrin said. .

Russia would, in principle, support the creation of a common euro zone bond, whilst continuing to invest in national sovereign debt, he said.

Russia would also consider investing in the European Financial Stability Fund (EFSF) which has already been tapped to aid Ireland, if the facility was expanded, Kudrin said.

But Russia was unlikely to offer a bilateral bailout to any euro zone country barring Cyprus, an offshore financial centre favoured by Russian businesses. Kudrin said talks on aid were under way and could be completed in a month.

Dvorkovich said any common BRIC proposal would have been first discussed at the levels of finance ministries and central banks. "I have not seen such a proposal, it has not come up at presidential level," Dvorkovich said.