Wednesday , 22 January 2020




Snyder goes on to say, in part:



So why is Greece so important? There are two reasons:

  1. major banks all over Europe are heavily invested in Greece’s [public sector, non-domestic] debt [of 31B euros of which German banks holds 32% (10B euros) and French banks 29% (9B euros) as of Sept. 13, 2011. Source: RBC Europe Limited].  Since many of those banks are also very highly leveraged, if they are forced to take huge losses on Greek debt it could wipe many of them out.
  2. if Greece defaults, it tells the markets that Portugal [24B euros in public sector, non-domestic debt of which each of Germany and France hold 25%] , Italy [199B euros of which Germany holds 18% and France 37% ] and Spain [76B euros of which Germany holds 28% and France 30%] would likely not be rescued either.  It would suddenly become much, much more expensive for those countries to borrow money, which would make their already huge debt problems far worse. If Italy or Spain were to go down, it would wipe out major banks all over the globe.



Most Americans don’t spend a lot of time thinking about the financial condition of Europe – but they should. Right now, the U.S. economy is really struggling to stay out of another recession.  If Europe has a financial meltdown, there is no way that the United States is going to be able to avoid another huge economic downturn. If you think that things are bad now, just wait.  After the next major financial crisis what we are going through right now is going to look like a Sunday picnic



Quite a few politicians in Europe are touting a “United States of Europe” [see article here (1)] as the ultimate solution to these problems, but right now the citizens of the eurozone are overwhelming against deeper economic integration plus, giving the EU even more power would mean an even greater loss of national sovereignty for the people of Europe – and that would not be a good thing.


What we are stuck with right now is the status quo but the current state of affairs cannot last much longer…At some point, something is going to snap.  When that happens, world financial markets are going to respond with a mixture of panic and fear.  Credit markets will freeze up because nobody will be able to tell who is stable and who is about to collapse.  Dominoes will start to fall and quite a few major financial institutions will be wiped out.  Governments around the world will have to figure out who they want to bail out and who they don’t want to bail out. It will be a giant mess.


Title and Link to Article Referenced Above:

1. Would a “United States of Europe” Be Best for the Eurozone?
