Greek Debt Issue is Haunting World Financial Markets

Over the last few weeks, issues of high debt obligations concerning Greece have been putting pressure on the euro. As this slide has been fueling  fears, that are starting to spread that Greece could be forced into a serious financial crisis, which could spill over into other counties. This has increased volatility on the world markets, as the euro continues its spiraling decline. To make matters worse, now many of the large brokerage firms are beginning to express concerns about the next major worry for the markets and investors. A good example of this can be seen with the recent comments from Merrill Lynch to investors. With the firm, telling clients that sovereign debt risk could be widespread on the continent; as the weaker countries of Portugal, Spain and Ireland could be the most likely to be effected next.

This is problematic for the E.U; because if the crisis in Greece spreads there will be fiscal discipline in spending and dramatic cuts in services. However, at a weekend meeting of the G7, the different finance ministers expressed confidence that these issues could be wrestled with. As the group said in a joint statement, that Greece is currently working a plan to cut the budget deficit by 2012.

What this shows; is that this will add increasing amounts of volatility to the world markets over the short term, which will keep the euro under pressure against the U.S. dollar. However, the medium to long term will depend on if Greece can be able to maintain the necessary fiscal discipline and make the tough choice necessary to cut its budget deficits. Only time will tell, if Greece and the different finance ministers can prevent this situation from spreading to other counties.