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Saturday, 23 April 2011

If banks fail in Germany, it will be the end of the Euro and the EU

If banks fail in Germany, it will be the end of the Euro

 April 2011: 
Banks across the Eurozone, in Germany as much as in the tottering economies of Greece, Ireland and Portugal, are still underfunded and at risk of failure.

 That is the latest warning from the International Monetary Fund which is concerned that the whole financial basis of the Euro and indeed the EU itself might be under threat.
These warnings were in the IMF's Global Financial Stability Report released on just last week.
In its conclusion the report said:
"Remaining structural weaknesses and vulnerabilities in the Euro area still pose significant downside risks if not addressed comprehensively."
The IMF also warned that in some vulnerable Euro area countries there was an impending funding challenge for banks and nations still grappling to come to terms with sovereign debt problems. In other words when the debts fall due repay,ment may not be possible.
The global banking system faces a £2.2 TRILLION wall of maturing debt. Colossal debts that must be met as they fall due in the next two years. Banks in the Irish Republic and Germany were highlighted as being especially at risk.
Banks going bust in places like Ireland would simply result in yet more bailouts funded by EU taxpayers – increasingly including the British taxpayer as well as Eurozone ones.
But if banks start failing in Germany, it will be the end of the Euro. That is because it is these German banks that underpin the European Central Bank (ECB), which is the Bank of the Euro as the Bank of England is for Sterling.
A German bank collapse, such as the IMF warns, would bring down the ECB and hence the Euro. It could also, quite possibly, be the start of the end of the European Union.