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Global exposure to European default

There's more discussion of how the European sovereign debt crisis is global in scope.

Tony Barber of the Financial Times writes about a Royal Bank of Scotland report, published on Monday, that suggests that banks outside of southern Europe have much greater exposure than previously thought. RBS estimates that institutions outside of Greece, Portugal and Spain hold approximately €2 trillion in total public and private debt in those three countries. The RBS report argues that the economic impact of a default is not via trade linkages or size of debt relative to GDP, but rather the interconnections, or what some call "contagion":

It is the financial linkages that suggest that these economies are too intertwined with foreign financial institutions to default, a phenomenon largely reminiscent of that of subprime … in terms of the potential ramifications that a default would have across the global financial system.

In the Daily Beast, Charles Morris highlights the possible links to the US. He writes:

But we are still tip-toeing along the brink of the abyss. American banks do not seem particularly exposed to Greece, but European banks are, and all the western banks are deeply intertwined. Just as Americans palmed off junk mortgages in the guise of highly rated mortgage bonds, a lot of Americans’ European assets may turn out, at the end of the day, to be backed by subprime debt from the European southern tier. The banking analyst Richard Bove estimates that JP Morgan Chase, by itself, has $1.4 trillion in exposure to Europe.

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