Volkskrant is a big dutch newspaper:
This is a hard hitting article which i translated to English.
European banks are in worst condition than American banks according to this professor.
Sunday big bank and insurance company Fortis got bailed out ... more banks that cannot
be helped will follow.
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Amsterdam - Other European banks will face big disasters like Fortis in the Netherlands/Belgium. Everybody who looks at their books will be able to see it coming. The books of the European giants like Deutsche Bank, Barclays and UBS (Switzerland) are in such unhealthy condition that it is possible that they will go down in the next few days. Nobody will be able to help them when this happens.
This is the warning given by german economist Daniel Gros. The scientist leads the Centre for European Policy Studies (CEPS) in Brussels. This 25 year old think tank on European policy is now mainly focusing
on financial policies. "The european central bank and European financial supervision are living in borrowed time" according to Gros
He points to the problem which affects all big European banks: They have a greater shortage of money than the American banks BUT THEY ARE TOO BIG TO GET RESCUED. "In the USA we saw that the banks were too big to fail: too big, too important to disappear. In Europe we gave a different situation: Too big to go bankrupt means to big to rescue. This is the case because the homeland of the bank is too small to rescue the bank.
The Deutsche Bank has 2.000 billion euro of open credit, one fifth of the german economy.
Barclays has 1.640 billion euro of open credit, more than the entire UK economy.
If individual countries cannot rescue a bank, the European union needs to step in. The call for this
is getting louder. The European Parliament calls for the European commission to make better rules for the
financial market. The Parliament mainly wants better supervision
Voices are also raised for an American solution in Europe, to bail out the european banks with funds
from the taxpayers. Old banker and economy professor Dolf van den Brink raised the idea to make available 600 billion euro to take over the bad loans. The European central bank would take the lead in this together with the European commission.
Both rejected this idea. Pumping hundreds of billions of Euros in the financial market is already done
by the European central bank therefor making such a funds unnecessary.
This solution is too expensive according to Daniel Gros. He has a more simple solution that will cost one tenth of Van den Brink's solution. It will be faster aswell.
Gros proposal is to have the European governments to balance the books of the affected banks.
Then supervision is needed by 12 European supervisors that will overlook the European financial market.
The main reason for the upcoming disaster in Europe is fractional reserve lending. Because rules were
more mild European banks lend more money than the American counterparts.
In the USA banks lend 20 times more than their actual capital, in Europe banks use a factor of 35(!)
Source:
http://www.volkskrant.nl/economie/article1071954.ece/Na_Fortis_wacht_andere_Europese_banken_een_ramp
