Not out of the woods yet [By Jiao Haiyang/China.org.cn]

Europe is on the verge of collapsing and the world is again in the quagmire, the reason being Europe, rather than just Greece, is the planet's soft belly, and the impact of Europe's eventual downfall would make itself felt throughout the world, even if Germany, or France, could somehow be spared.

The scale of impact is unpredictable, but potentially worse than that of the recent toxic assets crisis.

The European block is the second largest economy, the first trade partner of China, the largest importer of Russian energy and the first buyer of high quality raw materials (it still holds the Hilton quota, the world's most expensive meat quota). All over the world European debtholders and many states maintain their reserves in euros. China, for example, has 1/4 of its reserves in such currency and holds a large amount of Greek, Portuguese and Spanish debt bonds.

Without debt restructuring efforts involving important debt amount reductions and extended maturities, Greece will not be able to meet her commitments, just like the rest of Europe's debt-overhung Europe's peripheric economies – Ireland, Portugal, Spain, and Italy, and the effects would certainly contaminate the rest of Europe including the region's strongest economies.

The illusion of dampening the fire by deferring debt maturities, is just that – a chimera. Unless public and private bondholders' debts be reduced and longer maturities be granted, default and meltdown are around the corner.

Debt restructuring means debt renegotiation of debts on behalf of those unable to honor them. In case of default it entails sovereign default. A country notifies her debtors he's unable to pay and goes into default, outright failure, or proposes to renegotiate her debt and pay less or get extended deadlines. Amount reductions may involve paying a percentage of the original debt, or the original amount during a longer period, or even paying one's whole debt in longer periods.