The crisis in central and eastern Europe threatens to spiral out of control. Some doomsayers think that it could even lead to a breakdown of the eurozone as concerns mount over western Europe’s banks’ liabilities to the region.
These banks’ exposure to financial institutions in emerging Europe exceeds $1 trillion, according to the Bank for International Settlements, with more than $400 billion of short-term debt due this year – an amount unlikely to be met. Austrian banks have the biggest exposure by assets, followed by the Germans and Italians.
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