Monday, August 24, 2009
European financial institutions have outstanding debt near or exceeding respective countries' GDP
People think the U.S. financial sector is strung out on debt, however, it pales in comparison to Europe. Below are the ratios of European Financial Institutions' international debt (most of that in dollars) as a % of their respective countries' GDP.
German banks and financial institutions have debt that is 85% of Germany's GDP. Spain's banks have outstanding debt that is 106% of Spain's GDP. France's banks have debt that is nearly 60% of that countries' GDP. American financial institutions have debt that is only about 36% of U.S. GDP.
If the Fed hadn't come to Europe's rescue with those massive dollar swap lines seen last year and earlier this year, the entire Euro monetary system would have come apart. It may still happen because the Fed has been sharply criticized for those loans, making it questionable whether or not they will do it again if things start coming apart in Europe.