Argentina defaulting on its sovereign debt could expose other global economic weaknesses, Juliet Schooling Latter has warned.
The research director for London-based Chelsea Financial Services said: “It will create some nervousness in markets. There has been a nervousness around sovereign debt in Europe, which has been largely washed away by Mario Draghi.
“But there is still concern around the emerging markets, what with the end of quantitative easing, a default could cause jitters.”
Pressure on Russia can also lead to a default. However, others argued that the effect of the failed last-minute talks between Argentina and creditors over $1.3bn (£770m) of debt would be limited.
Adam Samuel, a financial services lawyer and banking expert, said: “In terms of the world’s economy, it is probably relatively harmless. We have got the world coming out of a whopping big recession. If institutions are not heavily exposed (to Argentina) then it will not matter too much.”
Guy Stephens, managing director of portfolio management firm Rowan Dartington Signature, said: “It seems to me this is small-scale relative to the Greece problem or anything in China. It’s not unexpected and not plugged into the global financial system.”
Steve Ellis, portfolio manager for the $817m (£483m) Fidelity Emerging Market Debt fund, said: “We expect contagion to other markets to be fairly limited. This is a highly technical legal case and a selective default.
“However, there will be remaining risks around a longer term default which would have negative impacts on the Argentine economy.”
Following the talks Axel Kicillof, minister of economy for Argentina, gave a statement saying the government would not “sign any commitment to compromise the future of Argentina.”
Shortly before talks failed, Standard & Poor’s placed the country’s credit rating on “selective default” after it failed to make a $539m (£319m) interest payment on its debt in time.
Adviser view
Andrew Johnston, a partner at London-based Holden & Partners, said: “I would be concerned that there are problems but things seem to be carrying on.
“You need a couple more of these to happen and suddenly people will wake up.”
