69ers – not an out of state football team
Dec. 12 (Bloomberg) — European banks turning to their governments to raise required capital could trigger a downward spiral of declining sovereign-debt prices and further losses for the lenders.
The European banks faced with dwindling profits and unable to tap capital markets may be forced to seek government help. About 70 percent of the capital requirement falls on lenders in Spain, Greece, Italy and Portugal, countries struggling to convince the world they can pay their debts.
“If governments put money in their banks, their sovereign debt will suffer, exacerbating their problems,” said Karel Lannoo, “Then the banks’ losses will rise because they hold the government debt. That’s a vicious cycle. It’s hard to know which one to stabilize first, the sovereign bonds or the banks.
It’s an incestuous sixty nine with Govts lending to their banks while the banks are lending to their Govts simultaneously. This is fine and dandy (some may say enjoyable) as long as it lasts. Party’s over when someone goes bust and the other is left to clean up the mess.