Debt crisis demands strong financial regulation in West

22:12, May 12, 2010      

Email | Print | Subscribe | Comments | Forum 

European Commission President Jose Manuel Barroso(L) and EU commissioner for Economic and Monetary Affairs Olli Rehn attend a press conference on the "Reinforcing Economic Governance" in Brussels, capital of Belgium, May 12, 2010. (Xinhua/Wu Wei)

The near-epidemic sovereign debt crisis draining the vitality of a number of eurozone economies is trumpeting the need for greater financial regulation in the western world.

It's true the United States and other western countries have been tightening their grip on financial markets after over-stretched derivatives and irresponsibly greedy financial institutions lured the world deep into the abyss of a global financial crisis not experienced since the Great Depression.

It's also true, and unfortunate, that these life-saving reforms have increasingly lost momentum since the world economy showed signs of recovery in the second half of 2009.

Old enemies always die hard. Massively hurt in the crisis and trying to sabotage the rising government oversight, the surviving vested interests in the financial sector have strongly opposed reform and stalled legislation in Western countries.

Opportunities for rooting out the sources of the global financial crisis were pitifully lost and, in exchange, we have zero substantial reform progress and have opened another Pandora's Box, unleashing the current debt crisis.

The deliberately complex financial derivatives have retained their omnipresence in the soul of the financial markets, including credit default swaps (CDS). Basically insurance against the default risk of debt issuers, the CDS have become more like financial gambling.

Many investors, who might not directly invest in the Greek government bond markets, could buy or sell Greece-related CDS while financial companies are more than willing to sell CDS to make a commission fee.

The CDS market has become a barometer of investors' sentiment towards the default risk of the Greek government. When more investors are betting Athens will go "bankrupt," the price of a CDS contract could rise considerably.

[1] [2]


  • Do you have anything to say?


Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • On Sept. 26, a resident passes by a flower terrace decorated for the coming National Day. (Xinhua/Hang Xingwei)
  • The photo, taken on Sept. 26, shows the SWAT team ready for the joint exercise. (Xinhua/Wangkai)
  • Two metro trains in Shanghai collided Tuesday afternoon, and an identified number of passengers were injured in the accident, the Shanghai-based reported. Equipment failures were believed to have caused the crash on the Line 10 subway, Xinhua quoted local subway operator as saying.
  • An employee at a gold store in Yiwu, located in east China's Zhejiang province, shows gold jewelry on Monday.(Xinhua/Zhang Jiancheng)
  • Tourists ride camels near China's largest desert lake Hongjiannao in Yulin, north China's Shaanx Province, Sept. 24, 2011. Hongjiannao is shrinking as a result of climate change and human activities, and may vanish in a few decades. Its lake area, which measured more than 6,700 hectares in 1996, has shrunk to 4,180 hectares. Its water level is declining by 20-30 centimeters annually and its water PH value has risen to 9.0-9.42 from 7.4-7.8. (Xinhua/Liu Yu)
  • Actors perform royal dance at the Gyeongbok Palace in Seoul, Sept. 27, 2011. A ceremony commemorating the 38th South Korea Sightseeing Day was held in Gyeongbok Palace on Tuesday. (Xinhua/He Lulu)
Hot Forum Discussion