Just a quick note.
I have mentioned many times before my suspicion that there are many more bad debts lying undeclared at the regional and municipal level. I think this is going to start to leak out faster now in Portugal, Spain and Italy. Italy might even be the biggest – They’ve already declared losses as a group of about €1B. Could it go up? Might others owe more? I don’t have enough data to say. But I get the feeling that the efforts to hide it all, are running out of steam.
Along with those hidden debts, other countries such as the UK, but not only the UK, are going to find it harder to pretend that PFI’s are somehow not part of the public debt. I think the bond markets are no longer going to play that game. The debts may not be consolidated back onto the public debt stats but I do think the sham that they somehow don’t count, is going to lose traction.
Lots of countries will get caught by this. PFI’s were a major Australian and UK export – the idea I mean.
I think this is another part of the reason the worries about Europe just won’t subside. We spent 750 Billion Euros we don’t have and it seems no one has been really very much re-assured. I think these hidden debts and the Balkan, Hungary, Rumania problems (see below) are all part of the reasons why.
Ireland’s credit unions may also have a surprise for us as well.
Much of this is being driven by unemployment. The bankers may like to ignore it as merely a ‘lagging indicator’ but when unemployment is high and imovable then bills just don’t get paid. And that hurts the little banks. Who can hide it for a while but eventiually they go POP.