国际英语新闻：Tighter credit in Europe tied to stock market turmoil

BEIJING, May 26 (Xinhuanet) -- Instability in Europe and the fall in the value of the Euro are creating ever growing concerns in global financial markets.

There are increasing fears that Europe could even face a full-blown financial crisis, which in turn may potentially damage the economy in the United States. Such concerns are encouraging some investors to abandon risky bets in the financial markets and rush for safety instead.

After gaining momentum in recent weeks, this shift is buffeting not only the world’s stock markets but also the credit markets, where the strains seem to be rising almost by the day. However, the worry is that the credit markets, which are where the American financial crisis began and which are now the focus of Europe’s problems, are entering a dangerous new period. The cost of credit is already rising in the interbank markets, where banks borrow money to finance themselves from day to day.

The global charge for safety was apparent in the financial markets on Tuesday, when the Dow Jones industrial average tumbled below 10,000 before staging an afternoon rally. While share prices recovered by the close, leaving major indexes near to where they started the day, traders pointed to the potential danger signals flashing in the markets for bonds and currencies.

The credit markets have not frozen as they did in 2008 after the collapse of Lehman Brothers. But the flight to safety is nonetheless creating sharp divisions among companies, and entire countries, that are perceived as risky and those that are considered relatively safe.

Investors have rushed to buy dollars and yen, traditional havens in financial storms, and sell the beleaguered euro. This in turn drove up prices of German government bonds, sending the yields on those investments, which move in the opposite direction of their prices, to their lowest levels since 1990.

Europe’s problems are rapidly shifting from Greece to Spain, one of the world’s largest economies. The decision by Spanish authorities to seize a savings bank over the weekend and then encourage the merger of four other troubled banks has raised questions about the health of Spain’s broader banking system.

While banks in the United States have relatively little exposure to their Greek counterparts, Spanish banks owe American financial institutions about 197.7 billion U.S. dollars, according to the Bank for International Settlements. Marc Chandler, global head of currency strategy at Brown Brothers Harriman, says that Spanish borrowers in both the government and private sectors owe foreign investors about 1.1 trillion dollars. In comparison, Greece’s external debt is closer to 236 billion dollars, Chandler estimates.