Economies on the other side of the Mediterranean are paying dear to hedge against further negative ramifications of the Greek crisis. Sherine Abdel-Razek reports on why this matters to Egypt Again, and in less than a year and half, financial markets drowned in red, the colour of losses. But the main players of the dramatic scene this time are not just individual companies like Bean Stearns, AIG and Lehman Brothers. Countries -- Greece, Portugal and Spain, all members of the EU -- are playing the main roles in another financial nightmare the whole world could share in. It all started with the Greek government saying it wouldn't be able to pay its debt obligations, and while Greece's contribution to the overall GDP of the EU does not exceed two per cent, the effects of a Greek meltdown would not be confined to its boundaries. Members of the Eurozone rushed to help for fear that, being all unified by one currency, other weak members of the Eurozone, such as the so-called "Piigs" -- Portugal, Ireland, Italy and Spain as well as Greece -- all of whom face spiralling deficits, would suffer the contagion of financial turmoil. Indeed, the Euro nosedived against the dollar to reach its lowest level in 14 months on Friday -- $1.25 -- while financial markets worldwide experienced a "We've been there just last year" panic attack. In Egypt, the market lost five per cent Sunday on the back of uncertainty in the overall global economic outlook while the Euro at the beginning of the week was trading at LE7.30, which is almost six per cent lower than its level at the beginning of May. The almost $1 trillion package the EU and International Monetary Fund announced Monday to help economies of the EU to escape the repercussions of the Greek crisis lifted market spirits; however, international and local stock markets fell back Tuesday and ended in the red again. "The Greek problems shake confidence among investors and the first markets to quit are the emerging ones, Egypt included," said Mohamed Helmi, head of sales in the Middle East and North Africa at HC Securities. Helmi attributed the decline to foreigners liquidating their holdings in the local market, as revealed by their being net sellers, selling orders exceeded their purchasing activity during the last week. On Tuesday it was even worse, with their selling transactions coming at almost double their purchases. Hani Genena, chief economist at Phoros for financial investments, a local investment bank, attributed this selling spree to the fact that most of the major investment funds that invest in Egypt are European, and with fears back at home, they liquidate their portfolios, a fact that Egyptians will have to live with for a while, according to Genena. Both Helmi and Genena, however, believe that the losses in the market will be limited, as its fundamentals are good and prices are attractive. Helmi expects the market to inch two per cent up and down in the coming period, with no steep declines expected. Elsewhere in the economy, Egypt will have to deal with repercussions of the crisis at least "in the short term". Genena explains that while bilateral economic relations with Greece are marginal (the overall trade volume between Greece and Egypt did not exceed 400 million Euros last year), the decline in the value of the Euro and the expected impact on all Eurozone economies are worrisome. The decline in the value of the Euro compared to the Egyptian pound would negatively affect local exports, especially if their inputs are bought in the now stronger dollar, according to Genena. On the positive side, the European Central Bank, aiming at making the bank's finances available as a means to energise economies of Eurozone bloc, will keep interest rates low. "This will widen the interest rate differential between the Egyptian pound and the Euro, and would, at the end of the day, strengthen the local currency and attract more liquidity from European investors." "The effect on tourism will be marginal as one of the positive outcomes of the financial crisis is that we started to diversify the destinations we target to promote our packages." Some two years ago the bulk of tourism came from Europe. Now, however, a reasonably high percentage of tourists come from Eastern Europe, Russia, China and Japan. Genena pointed out that Egypt was lucky enough to escape one of the adverse effects of the crisis. Amid such international problems the cost of government borrowing from international markets became very high to cover the risk. The Emerging Markets Bond Index, an index that monitors the spread between rates paid by emerging markets on their sovereign bonds to that of US sovereign bonds, widened to four per cent on Monday. "When Egypt issued its sovereign Eurobonds that index was around 2-2.5 and we paid 5.75 per cent on the 10 years tranche of the sovereign bonds. Had Egypt waited for a couple of weeks to issue the bonds the cost would have increased," Genena said.