An international banking survey shows that bankers see a high risk that the euro crisis will cause a banking crisis and global recession.
The annual "Banking Banana Skins" survey by the Center for the Study of Financial Innovation (CSFI) and PricewaterhouseCoopers reveals that bankers are more fearful than ever that the eurozone debt crisis will prompt countries to default and the euro to collapse.
In fact, anxiety is the highest since the survey started 13 years ago.
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The shock of a euro collapse would hit banks around the world, not just in Europe, the experts fear. Banks could suffer huge losses, go bankrupt or become nationalized, and the global economy could fall into a recession.
Many of the 700 bankers, regulators and other experts surveyed expect more bank failures and nationalizations.
"The picture painted by this survey is very bleak," said David Lascelles, the survey's editor. "It shows a fragile banking system beset by major threats and uncertainties."
"Banks are clearly worried about the dangers posed by continued turmoil in the eurozone, the threat of a further credit squeeze and uncertainty created by continued regulatory changes," stated PricewaterhouseCoopers banking partner Andrew Gray.
"Against this backdrop many banks will struggle to generate adequate returns across their business. Banks will be forced to reshape their businesses and further job losses across the sector seem inevitable as banks seek to drive down costs."
An increase in political interference and government regulation complicates the picture. Although new regulations are meant to solve the banking crisis, they are increasing costs and distracting banks, making it harder for them to supply credit, according to the report.
Greece, the most troubled eurozone country, is negotiating with the so-called troika, the European Commission, the International Monetary Fund and the European Central Bank, for another bailout in return for budget cuts and labor reforms.
Yet the budget targets are unrealistic and Greece is irreversibly bankrupt, writes Yanis Varoufakis, an economics professor at the University of Athens, in an opinion piece for CNN. The eurozone is unsustainable as we know, and the rescue package was flawed from the outset, he writes.
"Something must give," he states. "If it is not our leaders' insidious lie, it will be the eurozone. It's that simple."
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