How the crisis could spread Greek.

The panic on the markets has led to rising rates Portugal and Ireland in late April.Keywords: debt, bonds, crisis, ATHENS, Greece.

Despite the plan of European aid to Greece, some observers fear that soon comes the turn of Portugal or Spain. This kind of crisis is contagious.

Snowballing, contagion, and European states ... Investors fear that the debt crisis spread to other Greek struggling countries of the eurozone, such as Portugal, Spain, Ireland and even the United Kingdom . For plan using the International Monetary Fund (IMF) and the European Union Sunday presented did not fully reassured.
"Investors remain nervous, especially because of fears about the spread of the crisis beyond Greece," observed the end of last week Barclays Capital. "The nearly simultaneous degradation by Standard & Poor's notes of Spain and Portugal emphasized and magnified the anxiety of the market, they feared that Greece is not the last European country to sink, "Barclays Capital analysis.
The mechanism of contagion is virtually unstoppable. "This is a double snowball effect: the banking system is first described, in particular with capital flight" (and because some financial institutions hold large amounts of Greek bonds), Valerie Plagnol analysis , responsible for strategy at CM-CIC. If Greece decides not to pay its medium-term maturities, banks may face significant losses.

From Asia to Latin America:
"The crisis is spreading also to other countries through assimilation," says Valerie Plagnol. Clearly, the markets are wondering: if Greece can no longer sustain its debt, then why Portugal did not he meet the same problems? This phenomenon is known. It has been observed at the end of the 90s when the Asian crisis, which eventually spread to Latin America, while the two regions had no particular economic ties. But the sub-continent was particularly vulnerable: the debts of the South American states were largely held by international investors.
Within the euro area, the crisis could spread Greek also a third channel. Because successive cuts of note Greek debt by rating agencies, many investment funds are obliged to sell their Greek titles for reasons of internal rules. Typically, when a title is degraded below a certain note, he crossed a plateau and the manager must sell. This level varies by institution.

Obligation "rotten":
However, if many want to sell "paper" Greek demoted Bond rotten by Standard & Poor's, one in front does not want to buy. "Since they can not rid itself of such securities, funds sold next on the list of European stocks riskier: Portugal," said Patrick Jacq, a strategist at BNP Paribas. Bonds Portuguese then come to their turn in the storm.
The situation today is such that end in Europe, said in a note Ciaran O'Hagan, strategist at Societe Generale, "no country weighted with a heavy deficit can not be certain to retain the confidence of investors in the weeks and months to come. "