And so the pain goes on. European bank shares fell sharply last week as news of an €80bn-€90bn (£68bn-£76bn) bail-out for Ireland sparked fears that senior creditors of Irish banks could soon be forced to accept losses.
Such concerns were particularly acute among investors in the UK and Germany – exposed to €110bn and €102bn of Irish bank debt respectively. The third-most exposed country, incidentally, is the United States.
The centre of the turbulence on Europe’s financial markets shifted last week, though, to Spain and Portugal, causing their governments’ borrowing costs to soar. The reason is that the rescue package being finalised between Dublin, the European Union and the International Monetary Fund may impose “haircuts” on all those who leant money to banks in the Republic – not just the “junior creditors”.
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