Is Greece a sign of problems to come?
A 0.9% fall in the FTSE All World Index yesterday brings the four day fall to 7% amid concerns that the Greek debt problem is infecting other markets. Aside from the fact that investors are now shunning potentially high-risk debt bonds there has been renewed interest in gold, which is seen by many as a safe haven. As a consequence, we are likely see further downward pressure on investment markets in the short to medium term and nobody is quite sure where this will all end.
Despite the fact that a bailout package has been agreed for the Greek authorities it is the civil unrest which potential budget cuts are causing which has caught the eye of many investors. If it is proving difficult to push these measures through in Greece, despite the size of the budget deficit, will we experience similar difficulties in other areas of the world?
The truth is that we are now entering a very different era in the worldwide political scene to that experienced over the last two years. This is not just a financial issue but more a problem with confidence in sovereign debt, something which has been the very foundation of investment markets for many years. If we are unable to trust governments around the world to honour their debt obligations in the short to medium term, who can we trust?
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