PIIGS Claims On European Banks: $1.5 Trillion; France Most On Hook In PIIGS Implosion

Tyler Durden's picture

Here is one reason why Europe, while doing everything it can to make it seem (politically) like a bailout of Greece is out of the question, is and will continue to do all in its power to prevent a domino effect within the PIIGS countries: actually make that 1.5 trillion reasons. According to the IMF, the total amount of foreign claims, in this case focusing on Southern Europe countries, better known as PIIGS, on European international banks is $1.54 trillion. And while many have claimed that Germany would stand to lose the most from an implosion in the European periphery, that is in fact not true true: with $781 billion, France has much more at stake than Germany, whose banks have "just" $522 billion in "Southern European" claims. And while the IMF cut German GDP forecasts in large part due to the country's exposure to Southern Europe, it appears that France is next on the chopping block.

This is shown in the chart below:

The source of the above data is IMF report titled: "Germany: 2010 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Germany" in which the Greek rescue ranger (funded to a great part by the US) decided to cut Germany's 2010 GDP forecast from 1.5% to 1.2%, and 2011 from 1.9% to 1.7%. In the report, the IMF notes:

"Simulation exercises suggest that German banks could suffer significant losses from commercial real estate investments in the U.S. and Spain, and more generally from exposures to Southern Europe.  The simulations also suggest that a reassessment of risks associated with claims on Southern Europe could have a large impact on capital flows within Europe, as German (and also French) banks would significantly reduce their foreign claims to restore capital ratios."

One observation from the above chart is that the US at least will not be majorly impacted in a worst case scenario as it has the least amount of exposure, with just $118 billion. The same can not be said for France, Germany or the UK, which as we pointed out earlier, have a combined of over $1.5 trillion in net exposure.

What is sure, however, is that since IMF has just cut German GDP forecasts, using the same arguments and methodology, France is next.

When observing just this phenomenon, BTIG's Mike O'Rourke notes with a dose of sarcasm:

There is a touch of irony here.  In his memoir, Treasury Secretary Paulson recounts an episode during the Bear Stearns meltdown when Deutsche Bank CEO Joseph Ackermann asked why Deutsche should do business with any U.S. investment bank.  There is no doubt, Ackermann gets high marks for exercising good judgment, on the other hand, his tact was reminiscent of Bear Stearns during the LTCM crisis in 1998.  Earlier this month, Ackermann found himself lobbying for a Greek rescue commenting “If we can’t stabilize the country, then the next problem after Greece would be the banks.”  Ackermann also stated that “If it really comes down to a question of rescue or no rescue, I’m convinced it should be a rescue.”

We have previously demonstrated that Deustche Bank's assets as a percentage of German GDP is 84%. Should Ackerman be in need of a bailout, the same will be true for Germany as a failure of the PIIGS would lead to a failure of DB, and likely Germany itself. Yet once again France avoids the focus: the country's top three banks: BNP Paribas, Credit Agricole, and SocGen: have assets accounting for 237% of French GDP! Who knows how much of this is collateralized by the banks $781 billion in PIIGS exposure. How has France managed to squeak through the cracks for so long? It appears that the country is in a much more dire situation vis-a-vis deterioration in the European periphery than anyone else, in terms of both exposure and risk concentration.

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trav7777's picture

How do you spell FUCKED in European?

Reggie Middleton's picture

Well, I wouldn't be the one to use such crude verbage :-), but if we were to illustrate such graphically, it would go a little something like this:

You see, you shouldn't simply measure gross foreign claims. It is the claims as compared to the size of the countries' overall finances that really matter since the inquiry du jour is whether said sovereign can bailout said banks. From this perspective, Ireland takes the cake, hands down. See http://boombustblog.com/Reggie-Middleton/1358-Ovebanked-Underfunded-and-Overly-Optimistic-The-New-Face-of-Sovereign-Europe.html 

Ireland has just come out today and admitted as much. Kudos for the honest.

I will soon be releasing a study of foreign claims of all of the significant sovereign entities in the world, as wells as other relevant factors, which will be guaranteed to be an eyeball opener.

Bloomberg, WSJ, CNN, NY Times, FT.com, if you are listening, this would be a good time for you to make nice with the local bloggers. A big story is coming out...

THE DORK OF CORK's picture

Reggie is I am afraid very accurate in his analysis - Ireland simply cannot pay its private external debt and if the sovereign loads up with this junk it will also default on its debt - something or someone is forcing us to equate bank bondholders with sovereign debt holders.

The Greek situation is being highlighted by the London / Frankfurt fraternity for a reason - Ireland Spain and Portugal hold enormous amounts of private bank debt and they wish to distract us from the core problem - which are dysfunctional banks and not dysfunctional fiscal spending

bugs_'s picture

Mama Mia thats a spicey meatball!

non-anon's picture

This is what irk's me, the banksters control the countries governments. Over generations they have used criminal means to get their god, filthy lucre. Replete in history the saga continues.

trav7777's picture

Yeah...this is the moneychanger clan, Bank of England racket.  Been goin on for centuries.

They lent the hell into the "emerging" economies, lending money they did not have, via "fractional reserve," and now the economy taps out and they will deflate the ever-loving hell out of it.

In the process, they hope to get bailouts signed by the sovereigns that are bankrupted that force the citizens to pay high taxes, to receive few services, and to take a share of sovereign assets.  Classic rent-seeking.

This is what they did in Argentina.  Iceland.  Elsewhere just in THIS financial crisis.  It's the Versailles Treaty model of economic slavery.  The BOE has done this so many times it's not even funny.  The Founding Fathers spoke of this VERY tactic, and the proscription of colonial scrip and forcing into BOE debtmoney was the most significant precipitating cause of the Revolution.

The old imperial powers are still at it, except with their banks and paper this time around.

France and Germany will *insist* that Greece "pay its debts," even if that means they extract the fkin organs from Grecians.  Nevermind that the major nations' banks NEVER ACTUALLY HAD the money they lent out.  They created it from thin fucking air.

We are steaming fullspeed toward worldwide repudiation of debt and the banking system.  When this crashes, people will realize how the major European historical imperial powers stayed on top even after their armies disbanded - they had the banks and controlled the paper that was used as money.

M.B. Drapier's picture

If the BoE was that damned smart, you'd think it would have taken steps to warn RBS and HBOS away from the Republic of Ireland's construction bubble, not to mention do something about the UK's own bubble.

sgt_doom's picture

A most salient comment I've heard repeated, and verified over the years:

One thousand years ago the monarchs (kings, queens, sultans, etc.) owned the majority of the world's property.

One thousand years later, in the present, they still own the majority of the world's property.

My how things have changed over time!

(And, while I fully agree with the gist of your overall comments, trav7777, sometimes, the banks are simply used as conduits by the big boys!)

Ragnarok's picture

The whole world is screwed and needs to default, but before that happens the powers that be are looting every last thing they can before going into hiding only to reemerged once the revolution is over and the grand cycle can start again.

sangell's picture

How much of that Piig BBQ is the ECB holding?

Hondo's picture

Because France has bought CDS on German default......bingo....safe and sound.

Cognitive Dissonance's picture

Who cares about nuclear weapons and Mutual Assured Destruction when you have the modern CDS version, which destroys world economic systems but leaves the people alive to suffer in the aftermath.

sgt_doom's picture

EXACTLY!!!

Once more CD nails it!  But of course, as long as the lowbrows and no-minds can be confused and bewildered. (Look over here, sheeple, China is our enemy -- and their banker of choice: Goldman Sachs.  Look over here, sheeple, that evil India is taking all our jobs -- and their banker of choice:  Morgan Stanley.  Look over here, sheeple, the nasties are demonizing JPMorgan Chase, so proclaims Jamie Dimon.  Satan's banker of choice:  JPMorgan Chase.)

"We're good.  We're big.  We're getting bigger."  Jamie Dimon, 2010.

Booky28's picture

Okay. What is the best way to benefit from this?

 

Short French longterm govt bonds? Short the Euro? Short the French equity markets?

HumbleServant's picture

The best way to utilize this information is to realize that fiat money will discover it's true value soon and you need to convert your FRN's into a true store of value like ACTUAL PHYSICAL gold, silver or cropland.

dnarby's picture

Short equities, long gold & lead.

SimpleSimon's picture

focusing on Southern Europe countries, better known as PIIGS

When did Ireland move to South Europe?  Did the Greeks buy them?

Gordon_Gekko's picture

"One observation from the above chart is that the US at least will not be majorly impacted in a worst case scenario as it has the least amount of exposure, with just $118 billion."

Phew! That's a relief. And here I was worrying about TRILLIONS in naked Gold shorts, Interest Rate Swap derivatives, ZERO capital...

RobotTrader's picture

IRE up 12% today, totally unfazed by the brief afternoon panic.

Today and yesterday on world record volume.

Wouldn't surprise me to see the gamblers jump on this one next...

LOL....

Never a shortage of speculators to jam the absolute worst stocks.

 

RobotTrader's picture

And Deutsche Bank was down a paltry 1.4% today, within a couple days of making 52-week highs.

No doubt, the 28-year old models working at that firm are high fiving as we speak.

"Passion to Perform"....

LOL.....

 

AnAnonymous's picture

How have they got through? Quite easy. Their situation is dire and serious business.

Jumping from one dog to another works for fleas as long as they are healthier dogs to jump on.

Somehow, boats are sinking all around the world. People still want to stay on the best sinking boats possible. Especially when they cant join other boats because of past beef.

This point must be kept in mind, the rise of the western world was not done only through hard work and benevolence. Other regions of the world have been seriously crooked in the process. Investing in a place you have crooked opens up the possibility they'll try to treat you as you treated them. In all fairness.

Capital is stranded within certain regions of the world. California, France are all serious business in this matter. If they fail, where to go? Greece and some others were irrelevant in this matter. That's why speaking against them, attacking them was possible. Not risky.
All boats are not equal when it comes to scuttling. Especially when the boat you sail is a pirate flag.

fUny1's picture

The Peter to Paul economic magician's parlor trick experiment of creating sovreign debt on one end and transferring it into less than 1% of the population of the World's hands is very close to ending Mary Antoinette style.

http://funy1.blogspot.com/2010/04/bullying-in-america-byproduct-of.html

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