Euro Contagion?

Some of you may remember Creditanstalt, the Austrian banking collapse that started the Great Depression.  Austria’s Hypo Alpe-Adria Bank went into insolvency earlier this year and last week we had the announcement of their largest bank, Erste Bank’s, major profit downgrade and risk provisions of EUR2.4billion.  Whilst it would be a stretch to say we are seeing a repeat of history, what is still very concerning (as seen by the flight to gold last night) is now Portugal’s second largest bank, Espirito Santo is involved in a debt repayment default and stocks in banks in Portugal, Italy and Spain all fell heavily overnight dragging down stocks around the world, and this in the same week Greece’s Government stated it would not bail out any failing banks after the ECB warned it is giving Euro banks just 6 months to fill the holes revealed in the recent Asset Quality Review.  

Whilst not a Creditanstalt situation this is however happening as Austrian banks have massive exposure to faltering emerging markets and occurring whilst the whole Euro zone is already on its economic knees.  A whole lot of smart people bought gold and silver last night…