Sunday, 25 September 2011
INTERNATIONAL FINANCIAL CRISIS: IRELAND WILL capitalise on any moves by euro-zone governments to use the European Financial Stability Fund to shore up their banks, according to Government sources.
The possibility of widespread recapitalisation of euro-zone banks was pulled into focus yesterday as fears of a default by Greece intensified. France’s top market regulator said 15 to 20 banks needed extra capital, although no French ones “at this stage”. It was reported yesterday that BNP Paribas is attempting to raise money in Qatar.
France’s banks are particularly heavily exposed to Greek government debt and would have to absorb substantial losses in the event of a default. Shares in BNP and the two other large French banks, Société Générale and Crédit Agricole, have slumped by more than 50 per cent over the past three months as Europe’s sovereign debt crisis intensified.
Their shares rallied yesterday on speculation that the French government will take steps to bolster their capital and might seek to raise funds from the EFSF,
“We just want to make sure that if any additional measures develop to deal with the crisis, that they work to Ireland’s benefit,” an Irish official said.
A default by Greece is now looking increasingly likely with US bank Citi warning yesterday that “we now expect a substantial and probably coercive debt restructuring of the Greek sovereign by the end of 2012 at the latest and likely much sooner”.
The bank’s European economics team warned yesterday that lower global growth and Greece’s non-compliance with the terms of its bailout, combined with increasing opposition in countries such as Germany to further bailouts, made a default likely by the spring of 2012 or even December this year. Defaults in Ireland and Portugal would soon follow “mainly because of political contagion”, according to the bank.
“In order to reduce the debt-to-GDP levels to 60 per cent (80 per cent) in 2012, it would require debt haircuts (ex-IMF) of 67 per cent (54 per cent) in Greece and about 53 per cent (34 per cent) in Portugal and Ireland,” they added.
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