"In fact, the IMF staff fully understands -- but cannot speak openly about -- a deeper and more serious weakness in the euro area that threatens not just Greece but all of peripheral Europe today. European banks are woefully undercapitalized -- meaning they operate with very thin cushions of equity financing (and therefore fund their balance sheets with 95 percent or 97 percent debt). As a result, they have only a very limited ability to absorb losses, creating the potential for insolvency to spread throughout their financial system -- and around the world -- in unpredictable ways."
Posted on: Sat, 08 Jun 2013 11:31:20 +0000
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