Europe’s most dangerous financial products

What’s scaring European investors most?

Credit default swaps on emerging market sovereign bonds, it turns out, according to an online poll created by Euro-MP Sven Giegold.

The competition solicited proposals for products falling into two main categories: those that harm consumers and investors, and those that harm the environment and the global poor. A panel of five analysts then selected eight submissions for the online poll.

The panel notes the EU has banned naked short selling of credit default swaps on government bonds, and argues it should also ban emerging market sovereign debt. More than 46% of the nearly 2,000 respondents chose these instruments as “most dangerous.”

Read: More credit for credit derivatives

Credit cards with extremely high interest rates took second place, with 22.4%.

“Revolving credit cards can lead the consumer to the impression that he is solvent even though he is not. Unlike conventional credit cards, a revolving credit card is a loan and not primarily a payment instrument,” the panel said.

Foreign currency loans payable on maturity came in third, with 21.2%. The loans appear to be bargains, but borrowers usually don’t understand the risks.

Read: Why you should consider credit derivatives

Reverse convertible bonds took fourth, with 9.6%. The name implies these bonds are secure investments. But their fortunes are actually linked to the price of a basket of shares, exposing the purchaser to the very market fluctuations she thought she was avoiding by purchasing the instrument.

The most dangerous products to the environment or global poor, according to the poll, are food speculation funds, which took 71.4% of the vote. The panel says these products can cause extreme price spikes for basic foodstuffs, taking a heavy toll on economically depressed regions.

Oil sands energy extraction was a distant second, with 13.3%. Uranium extraction had 11.7% of the vote, and gold and silver mining 3.6%.

Read:

Banks pull food-commodity ETFs

Does investing in food punish the poor?

Risks and opportunities for Canadian oil sands