Saturday 18 Aug 2018 | 16:20 | SYDNEY
Saturday 18 Aug 2018 | 16:20 | SYDNEY

Acropolis Now


Mark Thirlwell

28 April 2010 13:50

The sovereign risk story continues to bite. Felix Salmon's pessimistic piece on the situation in Greece has been getting a lot of linkage. And the pessimism appears to be spreading as ratings downgrades for Greece and Portugal have spooked financial markets worried about growing contagion. 

As the FT's Wolfgang Munchau suggested a few days back, Greece is looking like the European equivalent of the subprime crisis. Trouble is, Europe has already suffered from the original subprime crisis, which has left it in poor shape to deal with a home-grown version as well.

The first chapter (large pdf) of the IMF's latest Global Financial Stability Report spends some time highlighting the potential cross-border consequences of sovereign funding problems and their impact on domestic banking systems, and warns that a sovereign credit crisis could undermine global financial stability. It's worth a look. The same report also provides a chronology of the lead-up to the current situation: