Europe's sovereign debt crisis has the potential to rock global financial markets on the scale of the collapse of Lehman Brothers in September 2008, says global investment firm Invesco.
'Europe presents a very serious position and the scale of the crisis could well be parallel with the Lehman crisis,' said John Greenwood, chief economist of Invesco, which has US$625.3 billion of assets under management as of December 31.
The so-called 'Lehman Moment' is widely regarded as the key threshold, at which the global financial crisis escalated sharply, leading to economic contraction and surging unemployment in Europe and the United States.
But Greenwood said the impact of Lehman's collapse was likely to remain greater, because markets had further to fall in 2008.
Best known in the city as the architect of the Hong Kong-US dollar peg, Greenwood also predicted that Greece and Portugal would leave the euro zone, and that they would default on their debts.
Despite official reassurances that the euro zone would survive, the two countries would also revert to their own currencies, which they would then devalue, Greenwood said.
He added that it was highly unlikely that euro-zone economies could weather prolonged deflation. Hong Kong, however, had done so in the aftermath of the Asian financial crisis in 1998, when it had to endure six years of deflation to stay competitive after the dollar-peg made Hong Kong dollars more expensive than its rapidly devaluing regional peers.