Contagion may be last year's word (this year's we are fairly confident will be 'stagflation' but we must give the mainstream media 3-6 months to figure this out), but it is never too late to visualize just how tenuous and perilous the supernational credit linkages between the various countries, especially in Europe are. Below we present a very useful interactive chart by the WaPo demonstrating the exposure linkages not only through banking and loans, but, just as importantly, and often forgotten, through trade.
From WaPo's Neil Irwin:
Greece sneezed, and now most of Europe has a cold. The European debt crisis has already spread like a virus from Greece to Ireland, and other countries are now at risk: Portugal, Spain, and Italy are probable candidates for financial problems. Economists call this the “contagion effect.” How does this spread? Some of it has to do with confidence. When investors see one country encounter financial problems, they may doubt the health of other countries that seem to share economic or even political characteristics.
Contagion also has much to do with actual economic links among countries. Researchers have identified financial ties in particular as responsible for the “fast and furious” spread of crisis from one country to another. Trading activity between countries, however, can propagate economic sickness more slowly.
And full chart - click through for interactive goodness.