The European debt crisis has entered “uncharted territory,” rekindling concern it will spread eastward through banking and trade links, according to the European Bank for Reconstruction and Development.
Italy’s Unicredit SpA (UCG) and Intesa Sanpaolo SpA (ISP), two of eastern Europe’s biggest lenders, fell to the lowest in more than two years July 11 as political infighting threatened to delay efforts to cut the budget deficit in the country with Europe’s largest debt burden. European leaders this week failed to agree on a new aid package for Greece.
“We are in uncharted territory,” Erik Berglof, chief economist at the London-based EBRD, which invests in eastern Europe and Central Asia, said in a July 12 interview. “The source of the contagion seems to be in worse shape.”
Two brief-but-very-important points:
a) UniCredit is the successor bank to Kredit Anstallt (of Austria), the failure of which in May 1931 triggered the Great Depression as a global event, forcing Britain off the gold standard just a few months later.
b) The Euro is not a sovereign currency, but rather a purely artificial creation (only 13 years ago) by an artificial central bank in order to achieve political aims rather than meet any particular economic need.