Economy

Fear and panic swept European and US markets overnight which, if it continues, could send the world in to another Global Financial Crisis.

At one stage the Dow Jones Index was down 997 points as investors feared the Greek financial bailout package wouldn’t be enough and other European countries would get in to the same strife.

I’ve been warning about the PIIGS (Portugal, Italy, Ireland, Greece, Spain) of Europe for a while now but last night it came to a head.

The fear is that the $200 billion being spent to bailout Greece won’t be enough to stop it defaulting on its debts and, after the violent protests of the last couple of days, the Greeks won’t have the guts to implement its promised austerity program.

On top of that, markets now fear that because of the size of the Greek rescue, if other countries (like Portugal and Spain) get in to trouble there won’t be enough money to help them.

Credit rating giant Moody’s has warned that banks across Europe are under threat from their financial exposure to the PIIGS. For example, French banks have $85 billion invested in Greece and the Germans $43 billion.

The last GFC in October 2008 was sparked by the fear of banks collapsing.

In May 2010 it’s the fear of countries collapsing.

It could get ugly.