Just Who Exactly Is Being Bailed Out in Europe?

(link to bigger image here)

Remember when I said that Greece wouldn't default, because Germany and France would bail them out in order to keep German and French banks solvent? The same is true of Ireland. The above table shows exposure of major banks in Europe's core to sovereign debt in Europe's periphery. The EU will continue to use the EFSF and IMF to bail out its members as long as that is necessary to preserve the stability of the banking system in the core EU countries. The EU is essentially going through it's own version of the 1980s Latin American debt crisis. The only difference is that in this case the periphery shares a common currency with the core. For now.

In short, it isn't Greece or Ireland that's being bailed out; it's German and French banks.

It gets interesting if/when Spain, which is probably too big to bail out, gets into trouble.