What can’t be paid back, won’t

Here is rather shocking data on Ireland’s debt situation from the BIS by way of the BBC:

BBC – Peston’s Picks: Why Ireland can’t afford to punish reckless lenders to its banks

“Total foreign bank exposure to Ireland’s economy is $844bn, or five times the value of Ireland’s GDP or economic output. Of that, German and UK banks are Ireland’s biggest creditors, with €206bn and €224bn of exposure respectively.

To put it another way, German and British banks on their own have each extended credit to Ireland greater than Irish GDP.”

These exposures will have to be restructured, which equals default.  Getting funds from the European Financial Stability Facility would merely be a technical avoidance of default.  Effectively, the German government would be propping up it’s own banks.

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1 Comment »

  1. What can?t be paid back, won?t…

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