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People's Daily Online>>Opinion

World needs safety net against euro crisis

By Zhang Monan (People's Daily)

08:21, December 02, 2011

Edited and translated by People's Daily Online

The acceleration of the European debt crisis is pushing the world economy to the verge of danger. The sovereign credit ratings of Portugal, Belgium and Hungary have successively been downgraded, Italy's three-year government bond yields exceeded the unsustainable level of 8 percent again, and the costs of the five-year sovereign credit-default swaps have continued to set new highs.

Particularly, the auctions of seemingly risk-free German government bonds have almost failed. The European debt crisis is likely to be uncontrollable, so countries around the world have begun building safety nets.

The global financial market has always adhered to three principles: sovereign debt is a risk-free asset and can be considered a benchmark for evaluating prices of other financial assets; sovereign credit-default swaps are the reassurance of potential default risks related to government bonds; central banks have acted as an ultimate protector and a lender of last resort.

However, sovereign debt has become the target of short selling and sell-offs, so the "safe assets" are no longer immune and the costs of sovereign credit-default swaps have been on the rise. Central banks can hardly offer sufficient liquidity. The three principles, which once were considered "iron laws" of the global financial market, have been betrayed amid the European debt crisis, marking that global financial asset pricing has entered into an era of disorder, panic and confusion.

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PD User at 2011-12-0478.234.165.*
China and other asean countries are in the crossway of humain history . Now is the time to show the world about our secular value of life that ones many europeans , because ther propaganda make them ignore . Do the best for us and all . That is our time .
PD User at 2011-12-0360.54.93.*
You worry about Europe but they don"t worry about you. In fact, they always look at Asians with suspicion. Try go to their countries and meet with the people see how they react to you. You know why they are putting up hurdles to you participating in their economy? They were your colonial masters before and that feeling still runs deep in their blood.

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