What is Contagion?

Contagion Definition. Contagion is a phenomenon in which an economic crisis spreads from one market to another in much the same way as a disease spreads without recognition of natural boundaries. The recent debt crisis in Europe is a case in point. As the debt and deficit problems in Greece became evident in the daily press, concerns were raised that similar problems might spread to other “PIIGS” in the Eurozone. “PIIGS” was a euphemism for Portugal, Ireland, Italy, Greece and Spain. Economies in these other member states had been similarly impacted by the global recession and were having difficulty maintaining a sustainable recovery. Headlines questioned whether the “Greek Contagion” would spread to these countries, but government officials were quick to assess that issues in each state were different and unrelated to Greek problems.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.