Continuing our European tour, FT Alphaville:
Here’s an interesting coda, and/or reality check, to recent attempts at predicting the ultimate fate of the eurozone amid Europe’s sovereign debt crisis....MORE
Germany really can’t leave the single currency even if it wanted to — and hasn’t been able to for a while, as its banks’ assets show fairly well.
On those German bank assets, Barclays Capital’s Thorsten Polleit observes:
…German banks have been accumulating significant exposures vis-à-vis foreign banks and non-banks in recent years, largely within Europe. This has been driven by a lacklustre domestic credit market and, in particular by the ‘New Economy’ boom in 2001, when German banks increasingly sought profit opportunities in foreign markets.Which is really all about the Bank-Asset-Bergs. These also received a boost in 2001 when state guarantees for the country’s Landesbanken were abolished, with a five-year adjustment period for lending. This led them to look for high yields abroad — including a dalliance with US subprime assets in 2006 and 2007.
Fast forward to 2010. As BarCap’s Polleit continues:
In this context we note that in Q1 10 German banks’ claims (or debt exposure) were €28.6bn on Portugal, €29.1bn on Greece, €115.0bn on Italy, €127.7bn on Ireland and €149.8bn on Spain.