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By Edmund Conway
No one – not Britain, the US nor Japan – is immune to a Greek-style debt crisis, one of Europe's chief policymakers has warned, as investors reeled from a week of market drama.
The sovereign debt crisis could claim new victims, including those outside the euro area, according to Lorenzo Bini Smaghi, a member of the European Central Bank's executive board. He was speaking as finance ministers met in Brussels to discuss their response to the crisis.
The new Chancellor, George Osborne, urged them to cut deficits faster and with more urgency, pointing towards the £6bn of in-year spending cuts he is set to unveil on Monday.
The warning came on another tense day for capital markets worldwide.
London's benchmark FTSE 100 dipped briefly beneath the 5,000 mark, recovering later in the day but nevertheless closing down 10.2 points at 5062.93. The FTSE has fallen by 3.8pc this week alone, and is 13pc down on its peak in April.
Although markets across Europe spent most of the day in negative territory, they recovered in late trading after German politicians backed their part in the $1 trillion safety net euro area members are constructing to prevent re-runs of the Greek economic catastrophe. On Wall Street, the Dow Jones closed up 1.3pc at 10,193.39 points.
Strategists said that the disruption was likely to continue for some time, as pessimism spreads throughout the marketplace. Some metrics put the level of risk appetite down at the lowest level since the peaks of the Lehman Brothers collapse in 2008.