Europe's Financial Flameout: Too Late to Extinguish?

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Europe's Financial Flameout: Too Late to Extinguish?
How many European banks will go up in smoke?

By Bob Stokes
Wed, 16 May 2012 17:30:00 ET

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You probably heard: Greek bank depositors just withdrew $894 million from the nation's local banks in a single day (May 14).

Greece President Karolos Papoulias said "the strength of banks is very weak right now" and expressed worry about “great fear that could develop into a panic.”

European bank shares have recently taken a hit. Yet it was less than two months ago when Goldman Sachs upgraded the sector to overweight from neutral.

When the April issue of Global Market Perspective posted on March 30, it offered subscribers a very different view. This was obviously several weeks before the massive Greek bank withdrawals -- the chart below is from that issue (wave labels removed), and the title tells you most of what you need to know:

Greece's brand new, post-rescue bonds are still failing to attract buyers...Indeed, Greece's new bonds began trading on March 12, yet two-year Greek yields catapulted to more than 200% following last months debt-swap.

Global Market Perspective, April 2012

Marketwatch (5/16) shows a worker cleaning the facade of the Bank of Greece headquarters in Athens. He's shining up the gold-colored front door which appears to be more than twice his height. Stately white columns stand on each side, framing the photo.

Almost all bank buildings look solid on the outside. But, of course, the goings-on inside are what count.

Greece is again in the spotlight, yet we know the financial health of other European banks is the bigger question.

The ratings for Italian banks are now among the lowest within advanced European countries, reflecting these banks' susceptibility to the adverse operating environments in Italy and Europe...

Wall Street Journal online, (5/15)

Spain's banks, even strong international lenders...are already posting big falls in profit as they write off losses on bad property investments...

Reuters (5/9)

Many banks in several eurozone nations are in sorry shape. But the single-day Greek deposit withdrawals of almost a billion dollars shows how fear is escalating. And fear is likely to lead to a European financial flameout.

Where will the financial ashes likely be scattered?

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Tags: banks, Elliott wave, euro stoxx 50, europe, european central bank, European debt crisis, eurozone, Goldman Sachs, soverign debt crisis

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