'Europe on the brink of currency crisis meltdownThe crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.
By Ambrose Evans-Pritchard
The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.
Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.
"This is the biggest currency crisis the world has ever seen," said Neil Mellor, a strategist at Bank of New York Mellon.
Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.
The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.
They account for three-quarters of the total $4.7 trillion £2.96
trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.
Europe has already had its first foretaste of what this may mean.
Iceland’s demise has left them nursing likely losses of $74bn (£47bn). The Germans have lost $22bn.
Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become "the second epicentre of the global financial crisis", this time unfolding in Europe rather than America.
Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.
Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.
Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard. Hence the growing doubts about the health of Spain’s financial system – already under stress from its own property crash – as Argentina spirals towards another default, and Brazil’s currency, bonds and stocks all go into freefall.
Broadly speaking, the US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global "deleveraging"
causes the dollar to rocket. Nowhere has this been more extreme than in the ex-Soviet bloc.'
Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.
"This is the biggest currency crisis the world has ever seen," said Neil Mellor, a strategist at Bank of New York Mellon.
Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.
The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.
They account for three-quarters of the total $4.7 trillion £2.96
trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.
Europe has already had its first foretaste of what this may mean.
Iceland’s demise has left them nursing likely losses of $74bn (£47bn). The Germans have lost $22bn.
Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become "the second epicentre of the global financial crisis", this time unfolding in Europe rather than America.
Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.
Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.
Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard. Hence the growing doubts about the health of Spain’s financial system – already under stress from its own property crash – as Argentina spirals towards another default, and Brazil’s currency, bonds and stocks all go into freefall.
Broadly speaking, the US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global "deleveraging"
causes the dollar to rocket. Nowhere has this been more extreme than in the ex-Soviet bloc.'
2 opmerkingen:
The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.
Zo, dat hakt er lekker in. Dat lezen we in Nederland niet. Gelukkig heeft de SP, na een jaar hardnekkig zwijgen over de kredietcrisis, een plan om de wereld te redden. Zo moet er een 'wereldmunt' komen die wordt beheerd door het IMF (godbetert). Tegen "de deregulerende dollar". En moet de Nederlandsche Bank de boel (beter?) gaan controleren. Echt waar. Ik begin me zo onderhand af te vragen of die Irrgang niet een infiltrant is. Hij is de enige bij de SP die kaas gegeten heeft van economie, maar blijkbaar is er niemand in de SP die doorheeft hoe ons huidige democratische systeem werkt.
Maar dat is niet vreemd, omdat ze er zelf deel van uitmaken. Dus is het ook niet verwonderlijk dat de SP de kapitaalinjecties "noodzakelijk" en "onvermijdelijk" vond. Een beetje sympathisant zal aan de hand van het SP plan stellen dat de partij zich gedraagt als Don Quichotte die tegen een windmolen strijd. Zelf ben ik er inmiddels achter dat de SP de windmolen ís. Het socialisme is op sterven na dood.
Aegon krijgt drie miljard van overheid
Het concern leed een verlies van 350 miljoen euro. Het bedrijf heeft onder meer voor 400 miljoen euro aan afschrijvingen moeten doen op slechte Amerikaanse hypotheken.
Aegon kan prima op eigen benen staan. Dit zei minister Wouter Bos van Financiën dinsdag in een toelichting op de 3 miljard euro aan steun die de Nederlandse overheid aan de verzekeraar geeft. ‘Maar de situatie is zo heftig dat de meest gezonde bedrijven in de problemen kunnen komen. Wij helpen ze door deze barre tijden heen.’
Bos noemde Aegon een ‘ontzaglijk gezond bedrijf’.
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