Really Stupid Loans: How Much Money Do Europe's PIIGS Owe to Semi-Solvent Europe's Banks?
Feb. 12, 2010
This chart appeared in a column by Edmund Conway of The Telegraph. It indicates the percentage of national GDP is invested in loans to the PIIGS: Portugal, Italy, Ireland, Greece, and Spain.
By my reckoning that's just under £250bn of exposure, so if these economies topple, we can't afford to smirk and be smug about the fact that we avoided joining the euro. We would be engulfed in a nasty, nasty financial crisis of our own.
Officials of the European Central Bank must decide: to basil out or not to bail out these profligate countries?
Northern Europe's banking system is on the line.
This is the moral hazard issue, but on the scale of a entire subcontinent (plus Ireland). If they get bailed out, what is to prevent them from doing it again?