In case you’ve been living under a rock, Eurozone sovereign debt concern is boiling over again. The interconnectedness of the eurozone banking system and another economy surfacing in need of a bailout (Portugal and Spain next?) suggest the can is simply being kicked down the road to the doorstep of national governments where, when all piled together, will be too onerous to manage. Here is a chart that was put together by the IMF in October to show exposure to Greece, which is significantly smaller in scope than Ireland relative to the part it plays in the financial sector (FT Alphaville):
Excerpted from FT Alphaville:
"Figure 10 presents four clusters (i.e., countries that together form more of a closed system), centered around a set of core connections that are closely linked to Greece: (i) a red cluster of countries with access to funds domiciled in Luxembourg; (ii) a black cluster with access to funds domiciled in the offshore centers of British Virgin Islands, Jersey, Cayman, Guernsey, and the Isle of Man; (iii) a blue cluster with Ireland at the core; and (iv) a green cluster of the U.S. with several key European and other countries. Greece is interconnected with each of the central nodes of these clusters. This close interconnection across other core countries suggests why asset re-allocations and flows might have been large systemically, with potentially significant impact on countries such as Ireland."
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