There’s an old Chinese saying that “when the wind of change blows, some build walls whilst others build windmills” – well there’s little evidence of either in the corridors of power in the EU according to Udo Baader, founder and head of German bank, Baader Bank, speaking at the Zagreb Stock Exchange Conference in Rovinj, Croatia, today.
He reckons that 2019 might blow up a storm as the bailout chickens come home to roost.
Just when the Eurocrats in Brussels thought that the financial crisis in the EU was over it looks like that is far from being the case.
Over the last 10 years, since the financial meltdown in 2008, the EU has poured €600 billion into the money pit that is Portugal, Ireland, Greece and Spain (PIGS) plus Cyprus – €400 billion going to Greece alone in 3 bailouts – effectively taking EU taxpayer’s hard-earned cash and giving it directly to the Banks by way of the Asset Purchase Program (APP), otherwise known as Quantitative Easing (QE).
Whilst there has been a general reduction in unemployment and an increase in growth in these countries and some Banks, particularly in the US, have done very well out of this scheme, other Banks, especially those in Greece have fared less well – with some of them having over 50% of bad loans on their books, guaranteed by government bonds which are either already high risk or are about to be re-classified so in the coming weeks.
And it’s not just the PIGS + Cyprus that are affected, Italian Banks are also sitting on high-risk collateral and the once mighty Deutsche Bank has lost 80% of its share value over the last decade.
With the possibility of further political instability in Germany following the next round of elections coupled with the perilous situation in Greece, 2019 is likely to prove a very bumpy ride for EU finances.