Unlike the US, many European countries and some European banks are having trouble raising money from normal commercial sources at acceptable cost. Several countries have serious solvency problems, and bailing them out threatens the stronger European nations that are trying to rescue them.

Although not part of the common currency, the UK faces significant risks if Europe cannot stop the spread of its debt problems. Like it or not, the UK is highly integrated into Europe through trade and other commerce. What happens over the Channel and its effects on the global economy will affect the "sceptre'd isle" The Chancellor has already downgraded growth forecasts. The UK banks have significant exposures to many of the embattled nations and European financial institutions, as evident by the losses incurred on their exposures to Ireland. The UK's attempts to restore its public finance through austerity may be undermined by developments in Europe. The uncertainty and volatility created by the crisis is already affecting confidence and

Read more on this story: Eurozone's problems present UK with great risks - Telegraph