Talk about Eastern Europe

The Telegraph: Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay or roll over $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut.

In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly by lenders and borrowers it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.

Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets.

They are five times more exposed to this latest bust than American or Japanese banks, and they are 50pc more leveraged (IMF data).

Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51pc in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia.

Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.

A note from Strategic Energy, as quoted by John Mauldin:
"The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan -- and Turkey next -- and is fast exhausting its own $200bn (€155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights. Its $16bn rescue of Ukraine has unravelled. The country -- facing a 12% contraction in GDP after the collapse of steel prices -- is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5% in the fourth quarter. Protesters have smashed the treasury and stormed parliament.

"'This is much worse than the East Asia crisis in the 1990s,' said Lars Christensen, at Danske Bank. 'There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU.' Europe is already in deeper trouble than the ECB or EU leaders ever expected. Germany contracted at an annual rate of 8.4% in the fourth quarter. If Deutsche Bank is correct, the economy will have shrunk by nearly 9% before the end of this year. This is the sort of level that stokes popular revolt.

"The implications are obvious. Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU "union bonds" should the debt markets take fright at the rocketing trajectory of Italy's public debt (hitting 112pc of GDP next year, just revised up from 101pc -- big change), or rescue Austria from its Habsburg adventurism. So we watch and wait as the lethal brush fires move closer. If one spark jumps across the eurozone line, we will have global systemic crisis within days.


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Karl Denninger - The Market Ticker
http://market-ticker.org/


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Category:

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[FireFox9032]

Euro zone is about to implode on itself. GREECE, PORTUGAL, SPAIN, LITHUANIA, UKRAINE, ICELAND, IRELAND - their economies are BEYOND repair. They're all BANKRUPT!!

The fuse is lit.

[LKHK76]

Funny, that this "expert" smartass knowitall has the nerve to call other people stupid yet he doesn't know what the name of the currency in Hungary is, have not noticed that German Mark does not exist for a decade or can't tell which countries are in the EU and which in Eurozone. A knowledge which should be part of his "job description" or at least basic 10 minute research if he wants to comment on it.

[robo1945]

@Omniscientus lol what a clown are you...just one word...Breivik

[MajkeeCze]

@zahaj

Many indicators.. For example - political instability, level of perceived criminality in society, number of homicides, level of violent crime, number of jailed persons, number of police and security officers, potential for terrorist acts, level of respect for human rights, ....

[zahaj]

and they are 50pc more leveraged - WHAT DOES LEVERAGE MEAN? 

[zahaj]

@MajkeeCze what determines that index?

[MajkeeCze]

@Omniscentus .. I live in Czech Republic. Czech Republic is 5th safest country in the world, Norway is 9th and Sweden 13th. U guys are just a joke.. Search Google for "Global Peace index 2011 ".

[Omniscientus]

@hrnciarska That can happen anywhere.

[hrnciarska]

@Omniscientus I live in Slovakia and at least I can go into town without being blown up and my kids can go on holiday without being butchered. They don't look so happy in Norway at the moment do they.

[Fridaey13txhOktober]

After the Soviet bloc., the plutocrates deliberately destroyed standards of living for eastern europe.

Serbia had higher of livings in 1995 than its eastern neighbours, despite 4 years oi war precisely because there was no time for the "democratic reformes".

[Fridaey13txhOktober]

The peoples of eastern europe needs to begin a revolution against the post-warsawa plutocracies, zeropean bureaucracy gone mad and bankster scum!