CONTAGION is the buzzword of the world’s newspapers at present – and it has nothing to do with the latest Matt Damon film about a deadly pandemic.

Financial contagion describes the domino effect as economy after economy in Europe gets caught up in the sovereign debt crisis.

Guernsey, sadly, is almost certain to miss the action thriller, despite its stellar cast. If only the financial crisis were so easily avoided.

For it is clear from today’s Budget that Guernsey’s hitherto relatively serene progress through the global debt crisis and recession is facing another mighty challenge.

Promising signs of some expenditure restraint brought about through the financial transformation programme were backed by strong initial growth estimates which prompted analysts to praise the Bailiwick’s ‘remarkable resilience’ in difficult times.

However, that initial optimism is tempered in the Budget by three notes of caution.

Firstly, uncertainty over further global turmoil and a double dip recession.

Secondly, the impact of LVCR. This was unknown at the time the Budget was written but is painfully clear now.

Lastly, uncertainty about what tax system will follow zero-10.

While there does not seem much that the island can do to influence the first two, zero-10 is an issue which needs to be put to bed.

As has been all too evident in recent months, business detests uncertainty. What looked at first to have been a wise policy of avoiding an EU review now seems to have put the island on the back foot compared to Jersey.

The impending review by the EU code of conduct group will not take place until the end of January and any new system will therefore have to go after the new Assembly is elected in April.

That is a long period of uncertainty over what is a key part of the island’s economy.

New deputies, and particularly the new Treasury minister, will need to be up to speed very quickly if the island is to get back on track.

Regardless, austerity is another buzzword which we should all get used to.