- Personal Finance»
- Banks, S&L's, Credit Unions
Spanish and Greek Banks Face Massive Loss
We, here in America, have always been insulated from global issues. partly because America is protected by two oceans. But, in today's world, this has been minimized greatly by the Internet and satellite communication.
What happens to European banks does have a large impact on American banks because of their investments with each other. Just as the housing market collapse in the US due to bad loans, Europe had its own housing issues and bad loans.
The European debt crisis will greatly impact us across the pond. What happens in Greece and Spain can cause the wave effect on US banks. Greeks fear their savings will lose most of their value if the country leaves the euro and converts back to the old currency, the drachma. This seems a likely scenario now and just this week Greek banks faced a massive loss from its customers. over 700 million euros were withdrawn and since January 2012, that number is 72 billion euros. The Central European bank has refused to loan more money to Greek banks, and the Central Greek Bank, helped lesser banks avoid collapse by loaning them their last reserves. The EU and specifically, Germany, is simply refusing to give the Greeks one more dime. Politically, the Greek government mirrors the financial crisis.
Because of the huge debt Spain is facing and because of Greeks making a run on their banks to pull their savings out before it is worthless, Spaniards are following the Greek example. On May 17, 2012, Spain's Bankia, one of its largest, lost 1 billion euros in customer withdrawals. Spain even partially nationalized this private entity to prevent total collapse. Had this happened, the wave effect would have hit other nations with debt issues, like Portugal, France. Bankia's value on the stock market lost 30%.
Right now, it seems many European countries and banks are teetering on the fence. It would be a good guess that the EU debt crisis is destined to get worse until countries begin to default. Greece is the first. The only country saving the EU seems to be Germany, even though they have their own problems.
As the EU situation worsens, American banks will lose and become impacted. A war with Iran and the repercussions in oil prices zooming up could be all it takes for the EU crisis to become catastrophic. Just keep your eye on what is happening across the Atlantic pond.