spectre of sovereign default..!

It appears that the financial tsunami unleashed by the sub-prime crisis had not been enough that the world is faced with possibility of sovereign defaults by countries like Greece. The debt burden on Greece is about 125% of its revenue receipts. It has sparked fears of default on its sovereign bonds. It has been well captured by rising credit default swaps on such bonds and has put heavy pressure on the euro which has depreciated against dollar in recent times. Moreover,it has made the global economic environment jittery as a default can be lethal to the fledgling world economy. Earlier ,Iceland had to face similar problems whose entire economy was on the verge of collapse. However, the crash could be avoid on account of assitance from IMF.

Such fears have already increased volatility in European stock markets . The possibility of double dip recession can't be ruled out. It is expected that other European powerhouses like France and Germany would come to the rescue of Greece as any default may shatter investors' faith and the situation might spread like contagion in the EU. We can only hope that the world economy doesn't have to face such tremors as the aftermath will be disastrous for the future of capitalism.