If you have any friends from Europe, chances are they may tease you about how America caused the 2008 financial crisis the world is now facing, and how America’s contagion is spreading through Europe.  It’s true that America bares a large part of the blame for its own financial woes, largely caused by irresponsible mortgage lending to sub-prime borrowers, and reprehensible INACTION by rating agencies and government officials.  But the brewing financial storm showing its head in Europe is about to get a lot worse.  Watch in the coming months as it sweeps through the continent with a vengeance that will make America’s own crisis seem insignificant.  Browse through some of coverage on the European crisis below:

  • From a recent Bloomberg article, - “European banks’ lending to emerging markets is about 21 percent of Europe’s GDP and U.K. banks’ loans are around 24 percent of national output, compared with 4 percent for the U.S. and 5 percent for Japan”
  • From a recent Christian Science Monitor article - Not my favorite publication, but they do sum up the problem quite well.  Emerging market interest rates are high, so emerging market citizens (Iceland being the most famous) take on mortgage and and other loans in euros, pounds, or Swiss francs.  Once emerging market currencies collapse, emerging market mortgage holders face little chances of repaying the loans denominated in euros. From the article, “Eastern European countries currently hold about $1.6 trillion in foreign currency debt, according to Morgan Stanley, and it’s overwhelmingly owed to Western Europe, whose large banks own 60 to 80 percent of Eastern Europe’s banking sector”.
  • From a recent UK Telegraph article - Austria’s exposure to emerging markets is a staggering 85 percent of that country’s GDP.  What chance does Austria have in collecting those loans when the recipients of those loans are now all in line for IMF bailouts?  From the article, “Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc”


    • If you are currently holding european stocks or any accounts denominated in euros, don’t hold your breath waiting for the recovery…