"European banks' toxic debts risk overwhelming EU governments"

[RedEarth]

,,,,, from naked capitalism

The title of this Telegraph article may strike some US readers as alarmist, and since one of the two authors is Ambrose Evans-Pritchard, a card carrying member of the uber-bear club, it may be easy to dismiss it.

But that would be a mistake. I was in Austria in December, meeting with some local businessmen, and to a person, they expected the bank failures to be of a scale that would force Germany to rescue the Austrian government (the German part of the contingent was amused at the Austrians' confidence that Germany would rush to their aid). Willem Buiter asserts that there is a "non-trivial risk" that Britain could go the way of Iceland. UBS alone poses a risk to Switzerland.

From the Telegraph:

“Estimates of total expected asset write-downs suggest that the budgetary costs of asset relief could be very large both in absolute terms and relative to GDP in member states,” said the document, prepared for a closed-door meeting of EU finance ministers.

“For some member states, it may be the case that asset relief for banks is no longer an option, due to their existing budgetary constraints and/or the size of their banks’ balance sheet relative to GDP. The extent of any risks to the EU banking system as a whole from an inadequate response in these member states needs to be considered, particularly in the case of cross-border banks”.

While no country was mentioned, the obvious candidates are Ireland, Luxembourg, Belgium, the Netherlands, Austria, Sweden, and Britain -- and non-EU member Switizerland -- which all have oversized banking sectors...

http://www.nakedcapitalism.com/2009/02/european-banks-toxic-debts-risk.html

[marketcrazy1]

1. this is REALLY bad

I mean ALL of it, everywhere! this financial mess is GLOBAL!. things are going to get nasty, fast!. prepare for the worst and hope for the best..

[thereismore]

2. This is not just because of a US housing bubble. This is systemic. It is built into

the modern capitalist system. Central bank (such as the Fed) issues money, lends the money, demands interest, but where the hell does the interest come from when there is only so much money around? Solution: 1) print money and have inflation, 2) go bust. And that's what's happening. Failure of financial institutions is built into the system of lending at an interest. Greed is what got us, folks.