Zhou Hong: European Debt Crisis Local Risk Increased &Nbsp, But Not Large-Scale Spread.

With the successive downgrading of Portugal, Hungary and Belgium's sovereign ratings and the soaring yields of the ten year treasury bonds in Germany, the nightmare of European debt crisis has become a reality.

Zhou Hong, director of the European Research Institute of the Chinese Academy of Social Sciences, believes that the European debt crisis is "not frozen for a day". It is the result of a series of European economic imbalances under the impact of the international financial crisis.

"The risk of partial default will increase in the future, but there is possibility of debt restructuring, but it will not spread on a large scale."

She said so.

The government and the financial system are in great difficulties.

Zhou Hong said that the EU's overall economic base is still strong, the level of modernization and industrialization is very high, and the people's wealth is still high, but the government and financial system are in great difficulties.

On the one hand, the European financial situation has been out of balance for a long time.

"European government spending is generally higher than government revenue. In the 1999~2006 year, euro zone government debt accounts for more than 65% of GDP, while there are many loopholes in the southern European countries."

Zhou Hong said.

On the other hand, Zhou Hong believes that due to the development of European integration and economic globalization, the industry in Europe has obviously moved and pformed, making the industries of some countries hollowed out, and the economic growth is mainly driven by domestic demand.

At the same time, she also pointed out that the euro area itself has a system defect, that is, the unified monetary policy and the decentralized fiscal policy can not complement each other, so that the EU is slow to respond to the influence of the system and authorization.

Last week, the weaker performance of German bond auctions undoubtedly exacerbated the market's worries about the future of the euro.

Zhou Hong pointed out that the European debt crisis exposed three major problems.

First, the flow of capital and production is increasingly constrained by national boundaries and constantly moving to areas where costs can be minimized.

Secondly, the government loses control of capital, but it is restricted by society. The decision-making and governance system can not meet the needs of the global market.

In the end, the false prosperity gained by the growth of financial capital burst rapidly after the crisis.

Solving quantitative easing?

"EU governance will advance steadily, but it is impossible for the" great leap forward ".

At present, the urgent problem is to rebuild market confidence, reduce the cost of debt financing, stabilize the banking system, expand exports and create employment. "

Zhou Hong said.

She believes that if we believe that Europe is moving forward and it is impossible to disintegrate, we may see that the euro area has solved the crisis through quantitative easing.

For the future direction of development in Europe, Zhou Hong believes that on the one hand, it is necessary to strengthen the pressure on countries with bad debt conditions to compel them to tighten their finances, reform and enhance competitiveness, even at the risk of economic recession.

On the other hand, it is further "Europeanization".

"Further Europeanization depends on the German attitude."

Zhou Hong said.

In addition, Zhou Hong also pointed out that there will be a lot of debt maturity in Europe in 2012, the impact of international capital will not disappear, and Europe will continue to be turbulent.

At the same time, European economic governance and the tightening of the euro zone's heavily indebted countries will proceed simultaneously.

"Next year, Germany, Denmark and other northern countries will increase investment growth, while the southern countries will explore a wide range of opportunities, including three directions, namely, export, financing and attracting foreign investment."

Zhou Hong said.