EMs fret at seeping euro debt crisis

THE ALCHEMIST

While investors have absorbed the impact of budget deficits in Southern Europe, advisers have been recounting the stampede into gold and other "real asset" funds, and of course, into emerging markets, where resilient growth and more favourable demographics suggest a positive economic outlook for some time to come.

But as the debt crisis seeps through Europe, the simple story of recession and progression in developing markets hides a greater complexity. The rest of the world, including Asia – the powerhouse set to drag the world back to growth – is feeling the chill from Europe’s slowdown. Unsurprisingly, the euro crisis effects are evident first in the countries nearest the bloc – North Africa and the Middle East. The early note of regional triumphalism at avoiding the financial crisis came to an abrupt halt following Dubai World’s declared debt ‘standstill’ in November. Now economists relay the...