From Socialist Voice, January 2011

Further banking losses likely


As the real reason for the takeover of Ireland by the European Union and the International Monetary Fund is being exposed—a fumbling attempt to save the euro by sacrificing the peripheral countries—the exposure of European banks to Ireland and the exposure of Irish banks to other weak countries has also come to light.
     It seems that Irish financial institutions played a filtering role in borrowing at very low interest rates from British, German, French, Dutch and Belgian banks and then themselves lent to such countries as Greece, Portugal, Italy, and Spain.
     The total exposure of European banks to both public and private debt in Ireland is €508.6 billion. Of that, Britain holds €148.5 billion, Germany €138.6 billion, Belgium €54 billion, France €50.1 billion, and the Netherlands €21.2 billion. Britain and Germany between them hold more than 56 per cent of the total exposure of European banks to debt in Ireland.
     But this much-feared contagion of defaults, bankruptcies and insolvencies that threatens the euro, and makes takeovers of Portugal and Spain possibly necessary, is equally a result of the lending practices of peripheral countries, such as Ireland. For, as we received capital from core countries, what could not be pumped into the Irish speculative bubble was exported to other speculative bubbles, namely in Greece, Portugal, Spain, and Italy.
     Irish lenders are now indebted by €5.1 billion to Portugal, €25.3 billion to Spain, €40.9 billion to Italy, and €7.8 billion to Greece. Proportionately, this makes Ireland one of the largest lenders to these peripheral countries. Indeed Ireland is the fifth-largest lender globally to Italy, Greece and Portugal and the seventh-largest to Spain. This all makes further banking losses highly likely and, as a result, Ireland’s illegitimate debt even greater.
[NL]

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