Pain Builds in Europe’s Sovereign Debt Risk

LONDON — European banks for years bolstered their balance sheets with assets considered safe and secure: the sovereign debt of European countries.

But now this debt no longer appears so safe, weakening banks when countries still depend on them for loans to help finance their gaping budget deficits.

The results of the latest European bank stress test, released on Friday, revealed in greater detail than was previously known just how exposed Europe’s banks are to the government bonds of Greece, Portugal, Spain and Italy, which are losing more value daily.  Read more

Categories: Economics, United States

4 replies

  1. The $, the £, the € all trashed, the £ more so by our BoE strategy, Yet the € is having a major crisis wth Portugal and other Euro countries in the same boat as Greece, Plus the $ with only 30days left to survive if no agreement on increasing its $14Trillion debt ceiling.

    Where will this leave the £ in yr pocket and savings which has been slashed and burnt to keep it low to support exports…..

    Scary scary times….. with no real solution in sight, which I suspect some Investment banks on Wall St, and in the City are making a lot of money on through their Shorts, Bets and Derivatives with support from Rating agencies actions such as this.. Makes you think?

  2. It is unthinkable that the ratings agencies should arrive at any other conclusion than that a failure to pay due debts on time in full is a default. Were the ratings agencies to participate in the charade of pretending otherwise they would lose whatever tattered reputation they have left. It may be zilch, but by god its lucrative.

    But it is no big deal,the markets factored in a Greek default months ago. Insurance contracts will be invoked, those who placed them will be compensated for their loss. The insuring companies will take over the new rolled over debt as their compensation and little will really alter.

    Greece will remain heavily indebted, because it is not being bailed out at all. All that is happening is that its low cost loans are being replaced with new low cost loans underwritten by the rest of europe. Slowly gradually Greek assets and infrastructure will be sold off at a knock down price and Greece will limp along in desperate poverty for ever.

    Greece cannot leave the eurozone, because between all its debts are euro denominated. If it stops paying those and tries to leave the euro, it is most unlikely that anyone will lend it substantial sums in new drachma. Meanwhile its population will still be deploying hard currency whenever possible, which leads to a suspicion that the euro will remain the currency no matter what the Greek government tries to do.

  3. Isn’t it about time investors took a haircut? Isn’t it about time to reset the markets to some kind of fiscal reality? Lets get it over and done with, there’s going to be a crash and the sooner it’s done the sooner we can restore some kind of ballance between what anything is worth. Revert to the gold standard and the U.S. dollar be damned, they’re the one’s who caused this mess, which includes their Federal Reserve their ratings agencies and their consumer-driven debt-laden economy.

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