Editorials

Brace for fresh crisis

(China Daily)
Updated: 2010-05-11 07:53

Editor's note: The EU's massive bailout plan cannot help solve the underlying problem behind the crisis- that the developed world might have been living beyond its means for too long.

The 750-billion-euro ($955 billion) bail-out plan that the European Union urgently came up with over the weekend to stanch a widening sovereign debt crisis that began in Greece has given global investors a much-needed shot in the arm for the moment.

The massive rescue package shows that European leaders have grasped the importance of resolute action to build confidence within and beyond Europe after the crisis sent waves of fear through global stock exchanges last week.

In an era of globalization, the debt problem of one of the smallest economies in Europe is no longer a local worry, but a global concern. Not only did it unveil the gravity of the debt crisis gripping some Euro-zone economies, it also highlighted the fragility of the ongoing global recovery by exposing deeper fears that government borrowing in bigger nations could be unsustainable.

Granted, extremely easy credit may be needed as an expedient measure to stop the hemorrhage that the world economy suffered following the collapse of Lehman Brothers late in 2008.

But such a counter-crisis practice will not help solve the underlying problem - that the developed world might have been living beyond its means for too long. And if the international community still cannot come to grips with the severity of this problem, it looks more than likely that some other economies will sooner or later be headed toward where Greece is today.

China certainly has to brace itself for renewed downturns, as Europe is its largest export market, gobbling up one-fifths of its total exports.

(China Daily 05/11/2010 page8)