Who's Most Afraid Of Contagion From Italy's Bank Meltdown? | Zero Hedge

Who's Most Afraid Of Contagion From Italy's Bank Meltdown? | Zero Hedge: "So which country’s banks are most exposed to Italian sovereign debt (apart from Italy itself)?

France — and by a long shot!

As Die Welt reports, the total exposure of French banks to Italian debt exceeds €250 billion. That’s triple the amount of exposure of the second most exposed European nation, Germany, whose banks hold €83.2 billion worth of Italian bonds. Deutsche bank alone has over €11.76 billion worth of Italian bonds on its books. The other banking sectors most at risk of contagion are Spain (€44.6 billion), the U.S. (€42.3 billion) the UK (€29.77 billion) and Japan (€27.6 billion).

These elevated levels of exposure help to explain why no matter how much Angela Merkel would love for the Eurozone’s new bail-in rules to be universally applied to the letter — for her own political survival, if nothing else — the risk of contagion, including for the already deeply distressed Deutsche Bank, is simply too great to be ignored. If Italian banks began falling like flies, it would only be a matter of time before investors began selling (or shorting) Italian bonds en masse, by which point the Doom Loop would be in full flow. And once it starts, it’s very hard to stop.

“The whole banking market is under pressure,” former ECB executive board member Lorenzo Bini Smaghi told Bloomberg. “We adopted rules on public money; these rules must be assessed in a market that has a potential crisis to decide whether some suspension needs to be applied.”

In other words, European taxpayers, get your wallets out, again. Your banks need you!"



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