History looks bleak for Eurozone debt crisis

HEDGE fund GLG Partners yesterday issued a stark warning to the Eurozone as it reiterated the historic trend for global debt crises to follow hot on the heels of banking crashes.

GLG pointed out that the banking turmoil of the late 1920s and early 1930s was followed a few years later by a global debt crisis of almost equal proportions.

“We just had a systematic banking crisis and the share of countries with debt crises is at a 100 year low,” the firm cautioned in a presentation.

GLG’s comments come amid widespread terror that the spiralling debt situation in Greece will spread to other, weaker members of the Eurozone – particularly Portugal and Spain, both of which had their sovereign credit ratings downgraded by Standard & Poor’s in the last week.

The warning comes despite a recovery for Eurozone bond markets yesterday on hopes that the EU and IMF will seal a bailout deal for Greek before the end of the weekend.

Yields on Greek 10-year debt fell a further 91 basis points to 9.03 per cent, while Portuguese ten-year debt yields dropped 39 basis points to 5.43 per cent and Spanish 10-year note yields fell nine points to 4.08 per cent.