A credit expert from Frankfurt is quoted painting a very grave picture of Euroland:
"Economically, we are in a very risky situation. Greece is close to default. We face systemic risk like the Lehman collapse and unless there is a bail-out for Greece, there will have to be a bail-out for the whole European banking system within two or three months," he said.
Yet they are damned if they don't, and damned if they do. "A Greek bail-out increases the risk of EMU break-up, because monetary union can only work if everybody sticks to the rules," Mr Felsenheimer said.
French banks have $76bn of exposure to Greece, the Swiss $64bn, and the Germans $43bn. But this understates cross-border links. There are large loans between vulnerable states. The exposure of Portuguese banks to Spain and Ireland equals 19pc of Portugal's GDP. Interlocking claims within the eurozone zone are complex. Contagion can spread fast.
And then consider this, from March 2009:
Contrary to public perception, the Wall Street Crash of 1929 was not the major catastrophe of the Great Depression; it was merely the precipitating event. In fact it was the bankruptcy of Credit-Anstalt in 1931 that made the Depression truly global, and crippled banks throughout Europe and North America. The resulting run on banks throughout the world, with numerous banking failures, was the catalyst that accelerated the rise in global unemployment.
The crisis which came to the fore in September of 2008 is not over, not by a long shot.
