Euro Crisis Continues: Eight Banks Fail Stress Tests

Eight of 90 banks this week failed a banking stress test, having a combined shortfall of €2.5 billion.

All three Irish banks: Allied Irish Bank (AIB), Bank of Ireland (BoI) and Irish Life and Permanent, passed the stress test.

The Euro Crisis continues, and economists are worried that Monday could see a bad day’s trading on the European stock markets.

Irish banking shares have been very low recently and the Irish economy is certainly a difficult period for investors with worries that Ireland may have to take out a second bailout loan. The affects of the first bailout loan are already worrying, with last week Michael Noonan commenting that the interest rates paid on the EU/IMF backed loan were too high.

Friday 15th the Irish Stock Exchange ISEQ fell to 2,861.69 down 28.66 points — see chart above.

Next Thursday leaders of the EU countries are to hold an extraordinary summit, and hopes are that a solution to the Greek sovereign debt crisis, and in turn the Euro crisis – will be found.

Banks that failed the stress tests were predominantly Spanish – numbering five. Two Greek and one Austrian bank also failed the stress tests.

One week after downgrading the rating of Portugal, Moody dropped a bombshell when this week it proceeded to downgrade Ireland’s credit status.

“This is a disappointing development and it is completely at odds with the recent views of other rating agencies,”
Irish Finance Ministry Michael Noonan.

European officials are clamouring to find a way to limit the affects of international credit ratings agencies such as Moody’s, Standard and Poor’s and Fitch Group.

Ben Judah of the The European Council on Foreign Relations writes that Moscow never normally passes up an opportunity to point a critical finger at European failings – but even the Russian administration is worried at the potential affects of a weakened Euro.

The Kremlin has been unusually uncritical of the EU, perhaps in a sign that it is concerned that Russian governmental and corporate assets in the European markets could be harmed.

“Euro-pessimism is an official religion [in the Kremlin]. Yet at the same time there are some worries about the Euro, due to the possible decrease in value of European assets of Russian corporations.”
Vladislav Inozemtsev, quoted in the ECFR article by Ben Judah.

By all accounts the next week will be a testing one for the Irish and European economies.

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