Other countries that may be at risk

  • mrken30
  • 10/10/08 31/05/09
  • unspecified
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Posted: Fri, 07/11/2008 - 04:39

Interesting article at http://www.resourceinvestor.com/pebble.asp?relid=47709

Notice that the UK stands a similar chance of becoming the next Iceland, especially with darlings at the helm.

Iceland’s circumstances were extreme, but there are other countries suffering from milder versions of the same fundamental inconsistent – or at least vulnerable - quartet:

1.
A small country,
2.
A large, internationally exposed banking sector,
3.
Its own currency, and
4.
Limited fiscal spare capacity relative to the possible size of the banking sector solvency gap.

Countries that come to mind are:

*
  Switzerland,
*
  Denmark,
*
  Sweden, and even to some extent
*
  The U.K.--although it is significantly larger than the others and has a minor-league legacy reserve currency.

Ireland, Belgium, the Netherland and Luxembourg possess the advantage of having the euro, a global reserve currency, as their national currency. Illiquidity alone should therefore not become a fatal problem for their banking sectors. But with limited fiscal spare capacity, their ability to address serious fundamental banking sector insolvency issues may well be in doubt.

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