Greek Contagion Fears

Greece's attempts to renegotiate the terms of its IMF/EU bailout package has seriously spooked the markets, forcing interest rates on Greek debt up.

The attempt at renegotiation has also spooked the IMF and Bundesbank, who both warn that there is a serious risk of contagion spreading from Greece to other Eurozone countries unless matters are not addressed with some urgency.

The Telegraph quotes from the IMF's World Economic Outlook:

"In the near term, the main risk is that – if left unchecked – market concerns about sovereign liquidity and solvency in Greece could turn into a full-blown sovereign debt crisis, leading to some contagion."

Axel Weber, CEO of the Bundesbank, is also quoted saying that there is a:

"significant risk of contagion effects. A possible default by Greece would most likely be a severe economic blow for other countries in monetary union".

Those politicians in the UK who claim that it would be beneficial for the UK to join the Eurozone may care to watch the unfolding car crash of the Greek financial system, before making nay further pro Euro pronouncements.