Group 1: Market Reactions - The European financial market experienced a significant crisis on September 2, with the British pound dropping 1.52% and the German DAX index falling over 2% [1][2] - The UK 30-year government bond yield surged to 5.69%, the highest since 1998, while France's 30-year yield exceeded 4.5%, marking a peak not seen since 2011 [2] - The US market also faced pressure, with major indices declining and the 30-year Treasury yield approaching 5%, indicating a sharp drop in investor risk appetite [3] Group 2: Fiscal Sustainability Concerns - The core driver of the market turmoil is deep concern over fiscal sustainability, with proposals for a windfall tax on bank reserves and new tax measures raising doubts about the UK's fiscal outlook [2] - Analysts warn of a vicious cycle where debt concerns lead to rising yields, further deteriorating debt dynamics [2] - The challenge for European countries is to balance spending pressures from geopolitical security and economic recovery with maintaining debt sustainability [2] Group 3: Structural Changes and Policy Challenges - Structural factors, such as the reform of the Dutch pension system, are reshaping the European bond market, with younger members directed towards riskier assets and older members shortening their duration hedges [4] - The European Central Bank faces limited policy space due to rising inflation, with August's inflation rate in the Eurozone at 2.1%, exceeding market expectations [4] - ECB Executive Board member Schnabel indicated that inflation risks are skewed to the upside, complicating the central bank's response to economic growth and inflation pressures [4] Group 4: Long-term Market Volatility - The current financial market turmoil reflects the fiscal policy dilemmas faced by European countries and highlights the limitations of traditional monetary policy tools amid increasing global economic uncertainty [5] - As debt burdens rise and geopolitical risks escalate, the global financial market may face prolonged volatility, necessitating investor preparedness for this "new normal" [5]