The Icelandic canary
The global credit crisis is now spreading to the most leveraged economies in the world. Iceland was the first economy to fall victim to the global credit crisis. However, it is not only Iceland that seems to be in need of a helping hand from the IMF.
This week first Hungary was offered “technical and financial” support from the IMF and then the Ukraine later also asked for assistance.
Contagion to leveraged markets
Over the past month credit default swaps spiked in a number of Emerging Markets indicating a significant increase in worries over funding problems on the back of the intensified credit crisis.
The rise in CDS spreads has been the strongest in Argentina, Pakistan and Iceland. In the graph below we show the 20 countries that have seen the strongest rise in CDS spreads over the past month.
