With Greece in the pits, we now see the far-reaching effects of the eurozone debt crisis in Spain, the latest and the largest country seeking a bailout for its troubled domestic banks.

Last Thursday, US President Barack Obama stressed that European leaders needed to urgently take tough decisions and go for difficult solutions to resolve the eurozone crisis. He added that a recession in the zone will have an adverse effect on the US economy since the region is its largest trading partner. Greece, he advised, needed to recognise that hardships for its citizens would worsen if the country left the European Union.

In the Middle East, particularly in the Gulf Cooperation Council (GCC) countries, the direct effects of the eurozone debt crisis are relatively subdued because a majority of these countries have their currencies pegged to the US dollar.

Another reason why the eurozone crisis will have a limited impact on GCC countries is that they have a financial surplus from higher oil and gas prices sitting as they do on 41 percent of the world’s oil and 21 percent of gas reserves. Also, most of the GCC investment in Europe is concentrated in the United Kingdom,France and Germany, countries not so affected by the crisis.

However, there are indirect ways in which GCC countries can still be affected. One of them being lower income from oil and gas. Because of the slow demand in European countries due to the crisis, the prices of oil and gas could go down. Most of the GCC economies are highly dependent on oil and gas exports the prices of which have proved to be very volatile.

Moreover, the eurozone crisis may have critical consequences on the investments made by GCC Sovereign Wealth Funds.

Many of these have investments in European banks which have been affected by the turmoil. But the extent of the damage that these risky investments had on GCC sovereign funds is difficult to pinpoint due to lack of transparency. We don’t exactly know the volume of euro bonds purchased by the sovereign funds. The possibility that the situation could go the way of the 2008 US crisis which affected the values of US bonds purchased by GCC sovereign wealth funds cannot be ruled out.

There is also the looming threat of inflation since many GCC countries import products, mostly food products, from Europe.

The GCC already has one of the highest inflation rates, peaking at more than 11 percent in 2008 which later dropped to 2.8 percent in 2010 and rose again to 3.3 percent in 2011. The Eurozone crisis compounded by an ongoing global food crisis will see food prices shoot up which will have a significant impact on food security in the region.

The GCC may have an advantage over other countries as it holds the second largest reserves in US dollar and the euro after China but it needs to protect itself from being affected by the impact of the crisis by speeding up the process for a monetary and economic union so that they can endorse and implement policies to guard against future effects of the crisis.

Even though analysts are optimistic about the GCC economy and forecasts say that the Eurozone crisis won’t have a big impact on the region, it will be wise to be prepared and have a safety net. The GCC can learn many lessons from the Eurozone crisis.

The GCC countries must not rush into investing in Europe just because there are many opportunities. We have to remember that with the yet unresolved debt crisis, it could mean that the values and the future returns for these investments could be low, like what happened during the 2008 US financial crisis.

Additionally, if GCC countries were to invest in Europe, they should do so in crucial sectors like manufacturing and not only in luxury and sports sectors, where high returns are not ensured.

GCC countries should also be aware that some Western countries may be wary of the region’s prosperity and attempt to control its economy in the guise of deals with big corporations, especially in the military and arms field.

It is important that GCC countries have the ability to walk the tight rope between generosity and pragmatism.

There are also other factors that can affect the situation in Europe like the rise of new political parties.

The recent elections in Greece, France and Germany have seen socialists gaining power. These political changes could affect the economic policies of European countries. We also have to take into account other possibilities like a Greek exit from the euro or Greece declaring bankruptcy if the EU cannot agree on a solution to bail out the country.

We should also consider the financial problems unfolding in Spain and Italy. It would be prudent for GCC countries to look into other emerging markets such as China, India and Brazil, which have shown strong growth and can yield high returns.

We have to wait and see how the situation will play out by the end of June after the G20 meeting in Mexico on June 18 and 19 as well as the US Federal Reserve meeting on June 20 and the EU Summit on June 28.