Why we should fear the Greek financial crisis

Call me a doom monger – but we understate the perils of the Greek financial crisis at our peril. Every stock market in the world took a hit yesterday. The Asian markets caught a cold before we even woke up this morning.

A relatively obscure New York indicator – the Fear Index went toxic yesterday. It’s called the Vix Index, which measures ‘fear’ in the US stock market. It rose by more than 30 per cent, its biggest one-day jump since the height of the financial crisis in October 2008.

Look no further than the Portuguese stock market – which lost 5 per cent in yesterday’s Greek inspired fall – for the next domino in the line. Cross the Iberian peninsular and Spain continues to look worse than rocky. But for heavens sake don’t look too closely at Italy. My City sources tell me Italy is the one that would bring the entire Euro house of cards down. And where would that leave us? Don’t think Sterling would represent a comfy haven.

I sat for 90 shocking minutes in a briefing in a sweaty basement in the Institute for Fiscal Studies yesterday as the young terriers who staff their research laid out the true scale of what faces everyone of us in Britain as we attempt the five year odyssey to pay off our own structural deficit. Yes, shocking stuff. Huge tax hikes and cuts in services are in the pipeline.

I have yet to attend one single news conference with any of the three major political parties challenging for power at which they did NOT offer yet another spending commitment. I can’t see the room any longer for the sheer size of this elephant – the unspoken, undescribed, uncosted (until yesterday) battle to save the British economy. We aren’t Portugal, Ireland, Spain or Italy. But crash them and we are beleaguered Britain. I used the word bankrupt of the UK economy the other night on Channel 4 News. It triggered much complaint. I withdraw it. But bankruptcy is in the eye of the beholder. And the stinkers who speculate and trade products that challenge national economies are out there. These sharks can yet crash the world economy in a way that leaves October 2008 a side show.

There’s to be a summit on May 10th to discuss Greece. I wonder if the sharks will wait that long. What a time to be looking for people to lead us away from the abyss!