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Bank of England warns that Eurozone problems could affect Britain

The latest threat to the UK economy appears to be coming from the Eurozone where the Greek economic crisis looks like spreading to the likes of Portugal and Spain. Mervyn King, the Gov of the Bank of England, has today suggested that a downturn in economic activity within the Eurozone will limit UK trade within Europe and could ultimately push the UK back into recession.

On the back of these downbeat comments we have seen yet another run on sterling which is coming under pressure, as is the euro. This is a very difficult time for the European markets with the European Union facing its first major issue since the massive expansion manufactured over the last few years. This is certainly a test of confidence within the European Union and a test of nerve with EU member states unwilling to commit to an economic bailout for the Greek government until budget cuts have been agreed.

While there has been limited impact upon European stock markets so far, if the issue is not addressed in the short to medium term we could see the likes of the UK stock market and other European stock markets come under pressure.

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