I Would Recommend You Panic

The Banking crisis in Europe is not a secret anymore. For months the top leaders of the European Union resisted the idea of a bailout for Greece, wringing their hands over the estimated $61 billion cost.* While the jawboning continued, the infection took hold. Bond vigilantes drove the Greeks' borrowing costs into the double digits.

According to IMSF **, Germany issued a blanket guarantee of all its consumer bank deposits, or €568 billion, together with a second, bigger bailout plan for failed Hypo Real Estate Holding (€400 billion in assets).

According to BusinessWeek***, Belgian-Dutch insurer Fortis, for example, holds $5.4 billion in Greek government debt—and $4.1 billion of Portuguese government debt, according to bank statements and public documents.

In my opinion, the riskiness of these eastern European loans is now coming to light as the global economic recession in both east and west Europe is forcing western banks to pull back, refusing to renew loans or ‘rollover’ the credits, leaving thousands of borrowers with unpayable loan debts. The dimension of the eastern European emerging loan crisis pales anything yet realized. It will force a radical new look at the entire question of bank nationalizations in coming weeks regardless what nice hopes politicians in any party entertain.

The last night, I was watching a video on Youtube* where Gillian Tett, assistant editor at Financial Times said, “We are not in the banking crises yet but the atmosphere is getting very nervous in market”. And in the same video all the guests agree on one single point that yes, the markets are in panic. Hugh Hendry from Ecletica Asset Management when talking about panic even said, “I would recommend you Panic. The European banking system is in crisis”.

Mr. Riaz Akhtar, a constructor working in Asia and Europe agrees with the current budget of UK government. “It is better to adjust your expenses for the sake of larger and longer term sustainability”, he said.

“Debt is better for profitability but it should be used carefully – in areas where it will bring more revenues – but we started to (we includes private and public sectors) use it as our finances are dependent on it”. He added. “don’t we all know that if Greece could handle its tax evasion practices then they might never need the bailout package from EU?”

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