IT\u2019S a $2.6 trillion mystery.<\/p>\n
That\u2019s the amount that foreign banks and other financial companies have lent to public and private institutions in Greece, Spain and Portugal, three countries so mired in economic troubles that analysts and investors assume that a significant portion of that mountain of debt may never be repaid.<\/p>\n
The problem is, alas, that no one \u201d\u201d not investors, not regulators, not even bankers themselves \u201d\u201d knows exactly which banks are sitting on the biggest stockpiles of rotting loans within that pile. And doubt, as it always does during economic crises, has made Europe\u2019s already vulnerable financial system occasionally appear to seize up. Early last month, in an indication of just how dangerous the situation had become, European banks \u201d\u201d which appear to hold more than half of that $2.6 trillion in debt \u201d\u201d nearly stopped lending money to one another.<\/p>\n
Now, with government resources strained and confidence in European economies eroding, some analysts say the Continent\u2019s banks have to come clean with a transparent and rigorous accounting of their woes. Until then, they say, nobody will be able to wrestle effectively with Europe\u2019s mounting problems.<\/p>\n
\u201cThe marketplace knows very little about where the real risks are parked,\u201d\u009d says Nicolas V\u00c3\u00a9ron, an economist at Bruegel, a research organization in Brussels. \u201cThat is exactly the problem. As long as there is no semblance of clarity, trust will not return to the banking system.\u201d\u009d<\/p>\n