Are the financial markets behaving like children in the ‘terrible twos’, throwing tantrums? Or are they like adults for whom panic has become a prolonged state of mind? 

In either case, reasoning is futile. Something dramatic is required to change perceptions. Otherwise, the sharp deterioration in the worth of eurozone sovereign debt, previously considered largely risk-free havens in the stormy waters of finance, threatens to unleash the mother of all financial crises.

Shell-shocked investors are seeking security. They find it in the advice of credit-rating agencies to ‘dump everything’, putting those agencies in the driving seat, a seat in which governments are supposed to sit. Small wonder, then, that many believe rating agencies have become part of the problem rather than the solution.

But insofar as politicians have failed to offer investors assurance to replace the perception of sovereign debt as rock-solid, the markets can be forgiven for being disoriented, even destructive. The absence of reference points also explains why the markets are prepared to place so much trust in rating agencies only a few years after they failed miserably in the sub-prime crisis

The fundamentals of the eurozone economy are healthier than the markets or rating agencies would have us believe. For example, the eurozone has a current-account surplus of 0.28% of gross domestic product; the UK has a deficit of 3.17% and the US of 3.24%. The eurozone exports roughly three times more than the US.

But in the war of perceptions, facts matter little. If policy responses are perceived to be inadequate, expectations turn negative, investors flee and downgrades ensue.

When that happened in mid-November to Hungary, which does not belong to the eurozone, we immediately sought the co-operation of the International Monetary Fund (IMF) and the EU – a move that surprised many but that will eventually, I hope, break the vicious circle of negative perceptions about Hungary in a way that our continuously improving deficit and debt figures have been unable to.

But there are better examples of the impact of perceptions within the eurozone itself. Recently, the European Commission, the European Central Bank and the IMF reported that Portugal’s economic programme was “off to a good start” – but Fitch, one of the big three agencies, then labelled the country’s bonds as junk. In Italy, Silvio Berlusconi gave way to Mario Monti as prime minister, one of Europe’s most respected economists – yet Italian spreads continued to rise.

To re-align perceptions, the eurozone needs to unleash a game-changing response. What we need now is a pooling of eurozone sovereign debt in order to stabilise the eurozone by virtue of sheer size and liquidity. This could stem panic and turn attention back to the eurozone’s strong economic fundamentals, to the steady improvement in improving balances and to long-term re-building.

Understandably, some fear their support could be abused. That, though, misses an important point: the reconstruction of our system is economic governance is well under way. And if we believe that treaty change would promote economic and political cohesion, we should act immediately.

The reader may wonder why the foreign minister of a country not in the eurozone is joining the choir of those calling for the introduction of debt mutualisation. Hungary, though, is not an outsider: it is bound by the EU treaty to adopt the euro as soon as it meets the criteria.

Moreover, the children’s tale about a tiny mushroom in the storm applies to us, too. An ant seeks shelter under the mushroom, and then, as the storm rages on, generously lets in bigger creatures, ranging from a cricket to a rabbit. With the storm over, the animals are puzzled to find themselves all dry under the mushroom – which has grown in the rain enough to cover them all. In the real world, it is the big rabbit – Germany – that has to find space for the latecomers. But the moral remains the same: we can weather the storm if we stick together, if the rabbit is generous and the ant honest.

János Martonyi is Hungary’s foreign minister.