It’s no surprise that Europe’s banks are carrying the burden of Greece’s
financial problems. The dilemma of how to keep the country going has
been plaguing the European financial community for months now. However,
what is news is the fact that these same banks that have been relied on
by their countries to bear the incredible financing involved are now
struggling themselves. A borrower the size of Greece can only draw on
lenders for so long before the size of the commitment because to
threaten the stability of the weaker institutions.
None of the major European powerhouses are standing undamaged. Germany,
France, Belgium and Britain are all battered by taking on major pieces
of the debt situation, without any clear promise of how that bill will
ultimately get paid off.
The Greek crisis has been compared to a number of financial calamities,
with the 1929 U.S. stock market crash and ripple to Europe frequently
referenced. However, the scale of the current losses associated with the
bailout is in its own class completely.
For the last quarter of 2011 both Credit Agricole and the Royal Bank of
Scotland reported a combined loss of 5.1 billion Euros. A number of
countries could operate for years on that amount of recent reported
writeoffs. Germany is in the same boat all on its own with its
Commerzbank losing 2 billion Euros alone.
However, the most eye-brow raising report comes from Belgium. The
country’s Dexia Bank is becoming insolvent. With a loss in the last year
totaling 11.6 billion Euros, the bank is about out of business
literally. Between Greece and the earlier U.S. mortgage-backed
investments that fouled beginning in 2008, Dexia has just about bled to
death. The Bank will be needing a bailout of its own to keep on going in
any capacity into 2012.
