Britannia Radio

This is dangerous and Ambrose Evans-Pritchard warned last weekend 
that this was likely.  Although Britain is not directly involved,  
the extent of globalisation is such thast we cannot be indifferent to 
the plight of the Germans in particular.

Politically it could be seismic as Germany underpins the whole EU, 
bot to speak of the euroi.    We may be tempted to rejoice at that 
but the global economy is teetering on a knife edge and we need 
cataclysmic shocks like a hole in the head.

xxxxxxxxxxxxxxxxxxxxx cs
===============================
TELEGRAPH 17.2.09
Eastern European currencies crumble as fears of debt crisis grow
Currencies have crumbled across Eastern Europe on mounting fears of a 
debt crisis as foreign creditors withdraw from the region.

By Ambrose Evans-Pritchard

Hungary's forint fell to an all-time low on Monday, and Poland's 
zloty slumped to the lowest in five years on plunging industrial 
output. Half of all loans to the private sector in Poland are in 
foreign currencies so borrowers face a severe debt shock after the 
40pc fall of the zloty against the euro since August.

"We're nearing the level were things could get out of hand," said 
Hans Redeker, currency chief strategist at BNP Paribas.

The mushrooming crisis has already started to spill over into 
Germany's debt markets, lifting credit default swaps on German five-
year bonds to a record 70 basis points. The gap between French and 
German CDS spreads has narrowed abruptly for the first time since the 
credit crisis began.
"Investors are beginning to ask whether Germany is going to have to 
pay for the rescue of Eastern and Central Europe," he said.

A report by Moody's released on Tuesday said the region's banks were 
coming under severe stress as the property bust combines with a 
rising debt burden. "Local currency depreciation is a major risk to 
East Europe banks," it said.

There are contagion worries for Western banks that have lent $1.74 
trillion (£1.22bn) to the ex-Soviet bloc -- split between $1 trillion 
in foreign loans and $700bn in local currency debt through subsidiaries.

Austria's banks are the most exposed with the share of risk-weighted 
assets tied to the region reaching 54pc for Raffeisen and 38pc for 
Erste Bank. The exposure of Germany's Bayern Bank is 48pc, Italy's 
UniCredit is 45pc, and Swedbank is 29pc.

The region needs to roll over $400bn in foreign debts this year, 
equivalent to a third of total GDP, raising concerns that it may need 
a massive rescue programme from the International Monetary Fund and 
the European institutions.

Dominique Strauss-Kahn, the IMF's chief, said he expected a "second 
wave of countries to come knocking" after earlier bail-outs of 
Latvia, Hungary, Ukraine, and Belarus -- as well as Iceland and 
Pakistan. The fund is scrambing to raise more money to cover the 
possible eruption of major crises in several countries 
simultaneously. The Japanese have already agreed to supply an extra 
$200bn.

The European Bank for Reconstruction and Development says East Europe 
may need as much as ?400bn (£358bn) in help this year to refinance 
loans and inject fresh capital into the banking system. Austrian-led 
efforts to create to a pan-EU fighting fund to tackle the crisis 
early have garnered little support so far.