Friday, April 15, 2011

Quote of The Day

The Economist suggests that we 'follow the money':
German banks are owed twice as much by banks in the three bailed-out countries as they are by governments. Once corporate loans and other exposures are included, Germany’s vulnerability is clear: its banks are owed some €230 billion. These numbers would ratchet up further were Spain to default. German banks have an exposure to Spain that is about three-quarters as great as it is to Portugal, Greece and Ireland combined.

Not all of these debts would be affected by a sovereign default, let alone be wiped out. Derivatives exposures are already marked to market, for example. But compared with the potential costs of full-blown default, the amounts that Germany and other countries are likely to put into the three bail-out packages look like excellent value. The rescuers need not be quite so sanctimonious. 
The Economist

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