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Greek tragedy threatens pensions and investments

Greek tragedy threatens pensions and investments

Category: Investments

Updated: 21/06/2011
First Published: 21/06/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The growing prospect of an all-out collapse in Greece spooked stock markets across Europe yesterday and overnight, threatening UK pensions and investments.

Finance ministers from across the continent have warned Greece that it must impose a number of hard-hitting austerity measures if it is to receive its next loan of 12 billion euros (£10 billion) to save the country from defaulting on its huge debts.

However, the Greek Government has already implemented a number of measures that have led to riots in the Greek capital, Athens.

They include privatising state-owned companies as part of measures to save £28 billion euros.

The failure to come to an agreement saw the FTSE 100 fall by just over 1% in early trading yesterday, falling to 5650 points.

The index fell again overnight, wiping billions of pounds off the value of the UK's leading businesses.

It is the latest slump in the FTSE 100, which has seen its collective value tumble by around £100 billion in the last fortnight, as the UK economy struggles to emerge from what has become a lasting slump.

And while the FTSE jumped back to just above 5720 this morning, there are worries that further problems in the Greek economy could shave billions of pounds off the value of pensions and investments held in the UK.

"The ongoing crisis in Greece has had a significant impact on shares, with the average pension fund down by around 2.5% over the last month," said Richard Eagling, Editor of Investment Life & Pensions Moneyfacts.

"Unless a successful resolution to the crisis can be found quickly investors will need to prepare themselves for a sustained period of market volatility and uncertainty."

Partly state owned banks Lloyds Banking Group and Royal Bank of Scotland were hit by falls of 3.2% and 2.7% respectively yesterday.

Among the other markets to be hit by the crisis were France and Germany, with the French CAC 40 and German DAX falling by 1.7% and 1.25% respectively yesterday morning.

The UK's Chancellor, George Osborne, faces pressure not to plough any of the UK's funds into another bail-out package and has assured those concerned that he would not pass any UK involvement in a further European Union bail-out effort.

He could be obliged to contribute to a bail-out by the International Monetary Fund, which could cost the UK another £1 billion, it has been estimated.

The Cebr has said that the eurozone is 'almost certain' to break up in the next five years and probably by 2013.

"Sooner or later both the Greek population and international creditors will tire of fighting a losing battle, leading to a break-up of the currency union as Greece pulls out, probably followed by other countries," Douglas McWilliams, chief executive of Cebr added.

"A series of bail-out packages and eventual debt restructuring will delay this moment, but it will come."

The Mayor of London, Boris Johnson, has added his voice to the debate, using his weekly column in a national newspaper to call for Greece to be allowed to go bankrupt and leave the euro.

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