Global banking sector faces spike in maturing debt
Of the the roughly US$11-trillion in long-term bank debt outstanding globally, nearly half will come due between now and the end of 2014, according to Moody’s.
The sudden rise in maturing debt “leaves the banking system exposed to refinancing risk” as the current low-interest rate environment is not expected to continue indefinitely, the rating agency said in a report on Thursday.
According to Moody’s, about US$3.4-trillion, or 33%, will come due by the end of 2012, and $4.9-trillion (45%) by the end of 2013.
EU recovery from debt crisis 'vital' to Chinese interests
Ahead of a visit to Europe by the Chinese premier, Wen Jiabao, Beijing declared Europe's recovery from its debt woes to be in the country's own interest.
"Whether the European economy can recover and whether some European economies can overcome their hardships and escape crisis, is vitally important for us," deputy foreign minister told reporters, according to local press reports.
"China has consistently been quite concerned with the state of the European economy," she said.
Speaking specifically of the Greek conundrum, Fu added: "We hope Greece can realise stability and development through co-operation between the EU and the international community. We hope the relevant countries will realise stable economic growth."
Greek debt tsunami could reach US shores: Why you should care about a financial crisis half a world away
It could be the default heard around the world. If Greece can no longer make payments on its national debt, the financial shockwaves may rock your local ban
As the Greek government teeters and European countries appear deadlocked over a rescue plan, holders of Greek debt face the biggest immediate risk. But the question many investors are asking — just as they did when the collapse of Lehman Bros. sparked the Panic of 2008 — is who, exactly, holds that debt?
“This fear of Greek contagion breeds not only a credit crisis but a liquidity crisis, not only in Europe,” said Lincoln Ellis, a managing director at the investment firm Linn Group. “It could spread to the American banking sector as well
As U.S. banks have expanded to compete on a global playing field, they've increased their exposure the financial stresses on European lenders. Just as the Panic of 2008 was sparked by a relatively small pool of subprime mortgages, a default by Greece could spark wider defaults by subprime government borrowers like Portugal, Spain and Ireland
Greece may view euro exit, debt default as best option in financial crisis
For one thing, Greeks are growing fed up with austerity and seem very unwilling to take on the still stricter conditions being demanded of them to win fresh funding and avoid default. The Greek economy has taken a beating during the past couple of years. Non-stop, large-scale political protests, routine general strikes and parliamentary rebellion have brought Athenian streets to a standstill. And Prime Minister George Papandreou's government is teetering.
Greeks are starting to question whether there might not be an easier way out of their crisis. And inevitably, Argentina's experience a decade ago has been attracting plenty of interest.
In other words, an exit from the euro, default and devaluation. And maybe that's what the market is already anticipating.
Barry Eichengreen, an economist at the University of California, Berkeley, famously argued that a euro-zone country couldn't leave the single currency because to do so would trigger "the mother of all financial crises"
This scenario is of great concern to the EU:
That would put the EU and the ECB into a very difficult position. A Greek default and departure from the euro would risk a systemic crisis across Europe's financial sector because of the huge exposure of Europe's banks to Greek government debt. The EU doesn't want to give in to Greece because of the costs involved and for fear of feeding moral hazard.
But the more Greeks become convinced they can go it alone, the better the deal the EU would have to serve up to prevent them from doing so.
It'll be interesting to see who draws the line where in this Greek standoff.
Greek leader offered to resign amid nation-wide upheaval
The prime minister's announcement came as the country was bludgeoned by another general strike and attempts by the so-called indignant protesters to prevent MPs from entering parliament for the presentation of another round of austerity.
Across the country, similar protests occupied or blocked access to government buildings.
Banks, schools, transport and much of the public sector were shut down by widespread walk-outs. Flights however continued as normal.
This situation in Greece has enormous implications for the EU, the viability of the Euro and in turn, world-wide finances.
Based upon a view of biblical prophecy, it is hard to imagine that the Euro will fail, as it is a precursor to a global currency and a global financial system (at least that is how things appear now - and who knows what may be in store).
Having said that, the situation is evolving so rapidly, we will know what the outcome will be quite soon. It appears that the EU will do almost anything to keep Greece as part of the Eurozone while maintaining the Euro as its currency.
We shall see. Soon.