UK banks have massive exposure to struggling European countries
It has been revealed that UK banks have an exposure of nearly £100 billion to Greece, Portugal and Spain together the other struggling European countries. As we mentioned in one of our earlier articles, investors have abandoned the Greek, Portuguese and Spanish stock markets amid concerns about the fiscal strength of the individual governments.
While the EU has stepped in to confirm that financial assistance will be forthcoming if required by Greece, there will need to be a period of pain for the Greek economy before it can start to rebuild. The problems in Greece have since spread to Portugal and Spain where bond markets are in disarray as investors become more and more concerned about the short to medium term future.
This is by far and away the largest test so far for the European Union and while the authorities have done as much as they could be expected to in the short term there are many medium to long-term challenges on the way. It seems almost inevitable that financial assistance, probably via the European Central Bank or International Monetary Fund, will be required by the Greek authorities although we wait further information in due course.
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