US bank exposure to Italy highest after total debt owed to France
Posted on 17 November 2011 with 3 comments from readers
Far from being insulated from the eurozone financial crisis the US is the most exposed nation after France because of its $205.3 billion in bank guarantees and derivative contracts, according to the table below from the Bank for International Settlements.
France is the most exposed to the Italian debt market with a total debt of $392.6 billion of which sovereign debt comprises $97.6 billion. Germany is next with $162.3 billion in total debt owed by Italy of which $51.2 billion is sovereign debt.
The table below also highlights the significance of the Italian market in comparison with Greece. The total debt to all countries owed by Italy of $867.3 billion towers above the $145.8 billion owed by Greece.
Missing support
Now the measures agreed by eurozone leaders to tackle the sovereign debt crisis are designed to handle a ring-fenced Greek debt crisis. They are nowhere near substantial enough to deal with Italy.
With Italian yields now above seven per cent this is no matter of esoteric economic theory. The Italian bond market has blown-up and yields are at levels that mean the debtor will never be able to repay the principal, and the whole principle of sovereign debt is that principal is always safe.
However, the focus is back on France as the Italian debt is far more significant for the smaller French economy than the US. The failure of the three biggest French banks suddenly looms as these debts go bad.
That said the contagion feedback to Wall Street of these loans and guarantees extended to keep the eurozone afloat is going to be a nightmare.
3 Comments posted by readers:
Add to this …
A) Bundesbank Target2 situation …
B) CDO’s. …. Not that, judging by Merkozy’s manipulation , any sovereign debt would/could ever default e.g. Greece ….
The nightmare of contagion feedback from the French banks to Wall Street is called the Greater Depression.
We are in the Greater Depression and the above nightmare will make it worse and more apparent to us all.
The Misery Index could be a good way of estimating the level of the Greater Depression at any one time. This is the addition of the unemployment percentage to the inflation percentage, and, if my memory serves, was 13.9% in the UK as recorded in the Daily Telegraph recently. The unemployment rate was 8.5% and the inflation rate was 5.4%.
The newspaper said that this was high but not yet the highest it has been. So, it will be interesting to see how high it does go and how quickly as the Greater Depression bites more and more.
It will also be interesting to compare the Misery Index with the GDP! I bet that the Misery Index will go on rising inexorably, whilst the GDP is kept above the zero line by government-debt-borrowing to raise the total level of economic activity.
How about Spain at nearly 7% today? They can’t afford that without growth for long. The irony is that Italians are richer than Americans on an individual basis, but it is a dying country with a population projected to drop to 40,000,000 by 2050. That makes growth difficult too. And paying down debt.