We have been here before, just over a year ago at the height of the Euro crisis, Europe’s finance ministers intervened and spelt out a financial package worth trillions in order to save the Euro and stop it from collapsing. Over twelve months on, individuals are again questioning whether or not the strategy has worked. The alternative doesn’t bear thinking about, the possible collapse of the Greek banking system and the other Eurozone banks that are now linked with the debt, could repeat the panic that followed the now well documented, collapse of Lehman Brothers three years ago. 

So the recent nervousness in the markets is not about Greece, but more about the implications should the current strategy not work. Into this complicated mix come the credit rating agencies. At the start of the month Greece's credit rating was cut again by the rating agency Moody's. It cut its rating of Greece by three points, from B1 to Caa1; this is just five points short of default. In their opinion, the new rating means Greece is 50% likely to default on, or restructure its debts in the next five years.

Instead of postponing the inevitable Greek default therefore, it would be far smarter to prepare for it. The Eurozone policymakers need to recapitalize Greek and other Eurozone banks with major Greek debt exposure. They also need to reaffirm their commitment to stand behind European interbank lending, and to keep pumping money into the system. There should then follow an ordered default on Greek debt.

This would not be easy, but would certainly bring back the confidence to the edgy markets. We have seen around a 5% fall over these last few weeks in the FTSE, although other asset classes such as debt and property have, as you would suspect remain largely unaffected. The flight from the markets to the ultimate safe haven, gold, has ensured that the gold price, as well as other commodities remains near their recent peaks.

 So once again, for those who are prepared to take a longer term view, equites, and in particular UK equities appear to be reasonably priced and offer the potential for a significant gain over the next three to five years. Any asset that you can buy at a 5% discount as compared to a few weeks ago is certainly worthy of further investigation. That isn’t to say there may be further short term falls, but compared to the recent highs in the index of 6200 buying in at the current level for a proportion of your investment  would seem to make sense.