Trichet says debt is global, not European problem

The tax row in the United States demonstrates that the sovereign debt crisis is not just a European problem but a global one, European Central Bank President Jean Claude Trichet said on Sunday.

Trichet also warned that the fragility of public finances on both sides of the Atlantic would make it impossible for Europe and the United States to bail out their banking sector a second time, making it imperative they get regulation of the sector right this time.

"We now have a crisis of public credit ratings which is not a European crisis, although Europeans are at the epicentre of a problem which is a global problem," Trichet told a business conference in southern France.

"You just have to follow the debate on the other side of the Atlantic in the United States on tax to understand that we are witnessing a global problem."

So there is a "global problem" where the sovereign debt crisis mainly confined to Europe and the US currently will have potential global repercussions on economies around the world.

SECOND BAILOUT IMPOSSIBLE

While western countries were able to fall back on solid credit ratings to fund a financial bailout at the height of the financial crisis, they no longer had that option and would have to rely on stricter regulation of banks, Trichet said.

"We are absolutely obliged to succeed because we cannot for a second time stump up on both sides of the Atlantic 27 percent of GDP to prevent the financial sector's collapse," he said.

Is Trichet suggesting that it won't be possible to bail out countries experiencing another financial crisis like that in 2008 and thus prevent its collapse?

Quite an ominous dire situation facing the world economy currently.

Trichet says debt is global, not European problem

It's certainly fair to say that while the EU can just about afford to bail out Greece, Ireland and Portugal, the economies of Spain and Italy are just too big, and there isn't enough capitol in Europe to bail those out.

I imagine if the worst happens and Spain and italy do need financial support, they'll only be able to get it from the Chinese. And lord knows what the cost of that will be.

The next 100 years will belong to the Chinese - well what can I say? the west got outplayed by the kingpin player on the field.

Soviets? gone. USA? gone. Islam? can be battered down by half a billion shock troops. Chinese played the long game and came out smelling of roses.