Jun 02 2018

Turkish defaults could end Euro – MoneyWeek

Turkish banks and companies owe approximately $150 billion to foreign creditors, mostly European banks, Andrew van Sickle wrote for MoneyWeek, and a major crisis could end up taking down the Euro with it.

In this scenario, after Turkish banks and companies begin defaulting, “Some southern European lenders will develop holes in their balance sheets and ask their governments and Brussels for cash. They will be “given short shrift” by Germany,” he said.

“State aid to the banking sector is a no-no under European rules, leaving only a ‘Brussels-mandated bail-in of bondholders in the banks’ home markets’. With their savings thus requisitioned by Brussels, Italians could ‘lose what enthusiasm they retain for the euro’.”

The Euro project would be unlikely to survive the departure of Italy, a major player and founder-member, van Sickle added.

Spanish and Italian banks have long been among the most generous lenders to their Turkish counterparts.