European sovereign debt fears 'continue to concern investors'

7 September 2010

Investors remain worried about the sovereign debts of many European nations, leading them to think twice about putting money with financial institutions which are holding government bonds.

Konrad Becker, a financial analyst at Merck Finch, told Bloomberg that banks are nervous about the potential effects of a sovereign debt default by the likes of Greece.

He warned of the potential knock-on effects such a situation could result in.

"A default by one EU country would lead to an evaporation of trust in banks," he stated.

"If investors aren't willing to invest in banks anymore, then many banks will go bust in months, not years."

Earlier this month, Hans-Werner Sinn, the head of Germany's IFO Institute, advised Greece to leave the eurozone rather than impose further austerity measures and risk the potential of serious civil unrest.

He said that the country quitting the single currency would be the "least bad" option, reported the Guardian.

By Claire Archer

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