After Greek banks were sent on a mandatory vacation for the week, investors around Europe are worried that the financial instability could spread across the region.
Greek’s inability to pay off its debts can have awful consequences not only upon the Greek economy. Ireland, Portugal, Spain, Italy, France and Belgium, all have substantial debt problems, as well. Traders around the world worry that a Greek collapse could have a domino effect on these economies.
“If the contagion starts to spread,” says Senior Banc De Binary analyst, Raymond Reagon, “these countries could certainly face massive problems of their own.”
Let’s look at three charts already showing the intense effects of the panic in Greece.
Chart #1:
The IBEX 35 – this index measures Spain’s 35 most successful stocks. As is apparent, the index fell sharply the moment markets opened Monday morning.
5-day chart: IBEX 35.
Chart #2:
The PSI 20, which measures Portugal’s top 20 stocks, also fell Monday morning.
5-day chart: PSI-20.
Chart #3:
And, finally, the France 40, measuring the top stocks of the Euronext Paris Stock Exchange, also followed the trend.
5-day chart: France 40.
Summary
The story is the same in all three charts. These markets are united by the same currency – the Euro. And, if the Euro is in trouble, that spells trouble for all economies which are reliant upon it.
Many analysts are currently questioning what the long-term effects of a Greek exit from the Euro would be. Witold Bahrke, an analyst from Nomura International in London, says: “It’s all about politics. Either things will go down relatively smoothly, or you have the extreme scenario where they leave the euro and we’re in uncharted territory. We can manage a Grexit, but after initial market volatility.”
Other analysts are not quite as hopeful. Sung Won Sohn, an economics professor from California State University, has said:
And that’s no laughing matter.
