In my last post, I wrote:
In theory, the EU could step in, either in the form of the European Central Bank or guarantees from the core. In practice, while I find this somewhat plausible in the case of Greece, I find it fairly unlikely in the case of Greece, Portugal, Spain, Italy, and Ireland . . . which is what we're looking at. (For that matter, why stop there? Have you taken a look at Belgium's debt-to-GDP ratio?)No sooner had I written those words, and "hit publish", than I turned to the Wall Street Journal, and found this:
LONDON--British regulators have asked U.K. banks to publicly disclose information about their exposures to Belgium's government and banks, in a sign of how concerns about the euro zone are spreading beyond southern Europe, according to bank executives.
Lloyds Banking Group PLC, which reported its second-quarter results on Thursday, became the first U.K. bank to disclose how much debt it's holding tied to the Belgian government or local financial institutions. Executives said they made the disclosure at the request of the Financial Services Authority last month.
"It was the FSA's suggestion that Belgium be added to the list," said Tim Tookey, Lloyds's chief financial officer. "That is the sole reason" the bank started making the disclosures.
Mr. Tookey said the FSA discussed the matter with Lloyds and other British banks "two or three weeks ago," as yields on Belgian government debt were rising.
Belgium is coming under investor pressure because of its high debt levels and concerns about political dysfunction. In one indication of investors' growing anxiety, the cost of buying insurance against the Belgian government defaulting on its debts has soared 61% since the beginning of July, according to data provider Markit.
As far as I know, Belgium still doesn't have a government, and hasn't for over a year, which gives them the dubious honor of being a world recordholder. If a crisis really hits, Belgian will be even worse prepared to handle it than the PIIGS.