Sunday, October 5, 2008

Two Europes

The Times:

Though they did not agree on a broad bailout along the lines of the $700 billion package that President Bush signed into law on Friday, the leaders of France, Germany, Britain and Italy pledged to prevent a bankruptcy on this side of the Atlantic like the one that brought down the Lehman Brothers investment bank in New York.

Yves Smith:

Hypo Real Estate, Germany's second largest real estate lender, teeters on the verge of collapse. The bank has a €400 billion balance sheet, which would make for a failure of a similar scale to Lehman's (Hypo's footings are roughly $550 billion, while Lehman's were $660 billion as of its last balance sheet date).

Although a private deal seemed to have been put together last week to save Hypo, it fell apart yesterday. Smith, who, it should be noted, is among the more consistently pessimistic commentators on the crisis, along with Nouriel Roubini, sees the end of the euro if Hypo goes down. Here's a French take.

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