Facing a debt crisis in the early 2010s, European central banks leapt into action to prevent financial contagion. With debt levels elevated and interest rates rising, some economies could enter similar crises as global growth begins to slow. The risk of a default in Europe is one that UK investors are monitoring.
The survey’s results show that debt-related market risks remain fresh on the minds of institutional investors following Europe’s sovereign debt crisis. Lessening the threat of a default are the fiscal backstops available to European nations, exemplified by the actions taken by the European Central Bank, the International Monetary Fund and others to control the fallout from the 2010 debt crisis.
The policy response to another debt crisis remains a significant variable, and asset allocators in the UK expect a default would have severe consequences for their investment portfolios, with 60% predicting an extremely severe outcome. Meanwhile, less than half (47%) believe their organizations are prepared for that scenario.
The Highest Debt Levels in the Eurozone (As of Q2 2022)
Source: Eurostat
60%
OF ASSET ALLOCATORS IN THE UK EXPECT A DEFAULT WOULD HAVE EXTREMELY SEVERE CONSEQUENCES FOR THEIR INVESTMENT PORTFOLIOS
Percent of GDP
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