Panic continues to grip the European ABS market in the wake of the U.S. subprime debacle. While many still claim that this reaction is unreasonable, the liquidity crunch that has inflicted the market has taken the U.S. subprime contagion to another level and has now extended into the short-term cash markets.

By the start of last week, the disruption to the European commercial paper market was enough to prompt the European Central Bank to step in with several liquidity injections of more than 300 billion (around $403.5 billion).

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