China and the U.S. finally found something to agree on: Europe is doomed and might take the world’s two biggest economies down with it.

Neither officials in Beijing nor Washington are actually using the “D word.” They don’t need to, not with Zhou Xiaochuan, China’s central bank governor, talking matter-of-factly about emerging nations bailing out the euro region and U.S. Treasury Secretary Timothy Geithner warning of “cascading default, bank runs and catastrophic risk” there.

The price tag for keeping the Greek-led turmoil from killing the euro is rising fast. Asians are so anxious about it that they’re querying Americans ― like me. In my travels around the region this month, I’ve faced a harrowing question: Would U.S. President Barack Obama chip in for a giant European bailout?

It’s hard to decide what’s more disturbing: the obvious answer ― over Republicans’ dead bodies ― or the fact it’s being asked at all, and by whom. Among those posing it were the finance minister of one Asia’s biggest economies, the central bank governor of another and a number of major executives.

Amid all the doubt and despair, here is one thing we do know: Keeping Europe together, if it’s even possible, will be monumentally expensive. Christine Lagarde’s International Monetary Fund is supremely out of its league. Its $384 billion lending chest would barely be enough to save Greece, never mind Spain or Italy. The IMF needs a bailout.

And so it’s come to this: Asia, flush with trillions of dollars of cash, is being cast as the potential savior of global capitalism. Being thrust into the role of a modern-day J.P. Morgan, the New York financier who restored order amid the Panic of 1907, is what Asia gets for saving so obsessively for a rainy day. Little did the region know that the storm its currency reserves would be called upon to address would be on another continent.

Asia should be wary. There are at least two ways in which Asia’s potential largess could end badly. One, developing nations saving the irresponsible lifestyles of rich Westerners elevates the idea of moral hazard to a whole new level. Two, Asia needs its money more than it may realize.

The thing is, Europe should have encouraged Greece to restructure its debt years ago. Instead, denial and paralysis got the best of politicians considering one bad option after another. They tossed hundreds of billions of euros down a sinkhole with nothing to show for it.

Now that German taxpayers are having fits about coughing up more to bail out their single currency’s weakest links, Europe is looking East. People’s Bank of China Governor Zhou finds himself saying it’s “too early” to determine how emerging economies can help the euro area overcome its sovereign-debt crisis. Yet he knows this is a matter of “when,” not “if.” The BRIC nations ― Brazil, Russia, India and China ― have $4.3 trillion of reserves, and Europe, a major trade partner, needs money.

That might calm markets, but it won’t reduce the need for major reforms. Why begin the messy process of creating a fiscal union among 17 members and generating a euro-wide bond issue if Asia’s money can buy time? Giving Europe the scope to again delay economic upgrades won’t do anyone any good.

Asia, meanwhile, shouldn’t let its reserve bulwark lull it into complacency. The region did a remarkable job of steering around the 2008 financial crisis. Doing it again if a second meltdown hits will be more difficult. Additional fiscal stimulus may run afoul of the credit raters. Looser monetary policy may well touch off unacceptable rates of inflation.

What’s more, Asia needs its savings to fund priorities such as job creation, education and infrastructure. And then there’s poverty. China’s $3 trillion-plus of reserves creates the illusion that the most populous nation has plenty of money. Yes, it’s a colossal sum, but it doesn’t take into consideration how a reprise of 2008 would affect China’s economy.

Maintaining growth in the vicinity of 10 percent will require even more stimulus than last time. Efforts to stabilize things a few years back necessitated hundreds of billions of dollars of public spending. Those debts could go bad if world growth goes into reverse again. China proved it can live for three years with reduced demand from U.S. and European consumers. Staying on a Spartan diet for five years or more might be another story.

There’s a view nowadays that emerging-market bonds are reliable havens. A senior Colombian official made that argument to me in Tokyo recently. That’s fine for now, but the longer the world goes without expansion from the major economies, the riskier that premise becomes. Without growth in the core of the global system, the periphery will suffer.

As Europe crashes, China and Asia may be called upon to back a rescue in the manner of Morgan a century ago. Of course, it’s not nearly as simple as that. Nor is it in the best interests of the global financial system in the long run. There’s something obscene about poor and thrifty countries bailing out richer, profligate ones. And that’s something we can all agree on. 

By William Pesek

William Pesek is a Bloomberg View columnist. The opinions expressed are his own. ― Ed.

(Bloomberg)