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Sunday, May 30, 2010

Europe Update

by Calculated Risk on 5/30/2010 09:07:00 AM

NY Times editorial: The Transatlantic Crisis: Europe’s Endangered Banks

... Several [European countries] have weak governments that may not be able to carry through the prescribed fixes. Even if they do, the budget cuts are likely to make them even weaker.
This is a recipe for economic stagnation. It also may not avert a debt rescheduling by some of the weaker European countries, which would force European banks to take a cut on their holdings. Sitting on slim cushions of capital reserves, European banks are in no shape for a sharp drop in the value of their assets.

It would be best to recognize that debt restructuring is inevitable.
American banks ended 2009 with $1.2 trillion worth of total European debt. ... It would be foolhardy to assume this problem is far away.
From The Times: Spain races to avert banking crisis as euro faces slide
One of Spain’s biggest banks was this weekend negotiating a merger with five smaller rivals as part of a desperate government effort to restore confidence in the faltering economy, which threatens to drag down the rest of the eurozone.

Caja Madrid, the country’s second-largest savings bank, opened talks in the hope of beating the June 30 deadline to tap a €99 billion (£84 billion) government bank rescue fund.
And also from The Times: Greece urged to give up euro
THE Greek government has been advised by [private] British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.