More from Credit Suisse, this time from Stuart Sparks – fresh stress at the sovereign level.
The exposure of Western banks to emerging europe is leading markets to price in a full below “institutional credit event,” according to Sparks. And yes, he agrees that Austria stands out as particularly vulnerable, with loans to emerging Europe totaling 80 per cent of Austrian GDP.
We see a substantial probability that the endgame in Europe will include unsterilized asset purchases. However, this form of unconventional monetary policy does not appear to be the ECB’s preference, and implementation is unlikely to occur until it becomes clear that full allocation refunding operations have not succeeded in forcing liquidity into the interbank and credit markets.
Related links:
Domino theory, Eastern Europe edition – FT Alphaville
CEE under heavy fire – FT Alphaville
5 reasons to remain bearish on CEE – FT Alphaville
Narrow-minded leadership hurts Europe – Wolfgang Münchau