By David Cottle
Whenever capital markets think they can at last settle down to concentrate on something else: mildly positive economic data, perhaps, or the crucifixion of BP, the euro-zone’s sovereign-debt hydra grows another head and lumbers back center stage.
Look at U.S. equity markets. They were doing OK on Monday until Moody’s announced its latest robust hack at Greece’s credit ratings. Such a move had been fairly well flagged but, even so, coming after Banco Bilbao Vizcaya Argentaria chairman Francisco Gonzalez gloomily said most Spanish companies and banks are suffering from a credit freeze, it was more than enough to send investors scurrying for the exits.
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A car passes by the Bank for International Settlements on May 10, 2010 in Basel.
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Now they have the latest quarterly review from the Bank for International Settlements to chew over, too, and it’s unlikely to have them hurrying back into the fray.
As is its wont, the BIS has been looking at who in struggling, so-called ‘peripheral’ nations of the euro zone owes what to whom. And, surprise surprise, it tells us:
“Euro-area banks were particularly exposed to the residents of Greece, Ireland, Portugal and Spain, accounting for almost two thirds of all BIS reporting banks’ exposures to these countries.”
Within the euro area, French and German banks, apparently, have the largest exposures ($493 billion and $465 billion, respectively) while, without, banks headquartered in the United Kingdom had larger claims on Ireland ($230 billion) than banks based in any other country.
Just to pile mess on top of mess, Spanish banks were the ones with the highest level of exposure to the residents of Portugal ($110 billion).
These data are particularly interesting and well timed. Leaders in Europe’s relatively prudent ‘core’ are conducting their own heated internal debates over the extent to which the profligate periphery ought to be bailed out with their voters’ hard-earned funds and reputations. The idea of blank checks to Greece, Spain and all isn’t one that resonates much with the German people by all accounts; it’s hard to imagine the French are any more keen. Both have problems enough of their own, anyway, highlighted most recently by this morning’ s dismal ZEW sentiment survey out of Germany.
But, alas, the BIS’ numbers blur the over-used distinction between ‘periphery’ and ‘core’ almost to the point of invisibility. For the latter, it may well be a case of ‘bail out the debtors; the banks you save may be your own.’
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Source: http://blogs.wsj.com/source/2010/06/15/were-all-peripheral-now/
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