Re: Mamma Mia

Date: 2011-10-30 05:38 pm (UTC)
The difference between the UK nationalization of RBS and an EU nationalization of ESFG is that old saw of monetary union but not fiscal union. Portugal can only buy ESFG (and this is but one of the banks in a mess) if ESFG is on its knees and on the verge of not opening on Monday (this was the situation for RBS). And even then it can only buy it with, in effect, German backing. Now, it might come to that -- if one weekend the crisis reaches the state that we all think it might reach. But if we get that far, it might be Credit Agricole, or BNP Paribas, or any one of a dozen Italian banks. ESFG will be a sideshow.

But, you are right in one sense. If a complete crisis is developing, this kind of mass nationalization is possible. This could be followed by compulsory mergers and job losses (that will be the hard part) and a complete restructuring of the European banking system. This probably has to come, but there's no chance of it occurring at the moment without a complete freeze-up, as far as I can see.

PJ
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