The Moody’s ratings agency said today that the threat of debt contagion arising from the Greek debt crisis could spill over into other countries within the European Union. Contagion is likely as investors feel countries including the UK, Ireland, Italy, Spain, and Portugal in particular, will be forced to increase bond yields in the future in order to attract buyers. For this reason, buyers will demand higher yields now to offset the expectation that yields will be higher later.
There is also growing pressure on the European Central Bank to deal with a rapidly depreciating euro that has hit year-long lows against the dollar, falling below $1.28 yesterday.
Peter Westaway, European chief economist at Nomura International, said that the ECB faced a “really important meeting”.
“This crisis is not just about Greece. it’s about the integrity of the euro as a whole,” Westaway told the BBC.
Source: BBC News