http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=11567
Excerpt:
One of the big story elements that's missing from this situation is the incredible exposure of European banks, especially from Austria, Germany, Italy, Portugal, and Greece in terms of loans that they've made since 2005. Their lending to Ukraine and its eight neighbors has increased by about threefold to nearly $1.4 trillion.
And so, you know, Austria in particular has about 35 percent of their total foreign bank loan portfolio in these nine countries. Germany has about 5 percent. Italy has 27 percent. And, amazingly, Greece and Portugal, which we, you know, associate with being bankrupt themselves, have put 18 to 20 percent of their loans into Ukraine and its neighbors--Hungary, Slovakia, Poland, Belarus, Bulgaria, and Russia itself.
Now, some of these countries have reserves. Russia, for example, has more than $550 billion of foreign reserves. But when you take out the reserves of the other countries, most of them are still heavy net borrowers. And so if there were some kind of economic crisis or if we tried to really assert trade sanctions or, you know, crack down on the foreign assets of Russian oligarchs, for example, I think a lot of these Western banks are concerned that it would sink the fragile European economic recovery and basically, you know, put a lot of these Western banks under.
Russia was originally going to put up $15 billion when Yanukovych was still prime minister and running the show, but since he was ousted, they withdrew that offer. I think the latest--the problem that Ukraine faces is that they have some big bills coming due. They have to--$1.9 billion of outstanding debt to Gazprom, the Russian gas company. And, you know, the number we have (but it's shaky) is $15-20 billion just to get through the end of the year.
So, traditionally the IMF doesn't do that for free. They come in and they'll lend money under so-called stabilization programs, which generally means, you know, a cutback in economic growth and domestic consumption in order to pay the creditors. Ukraine's outstanding debt right now is north of $200 billion. And so we're talking about a substantial amount of money just to pay those banks that have loaned so heavily to the Ukraine.
But more generally, Ukraine's other neighbors are also heavy borrowers. In fact, the interesting thing is that in the wake of the mortgage crisis in 2008, I think Western banks took a look around at who was borrowing, and they said, well, this is a good idea, let's lend money to Eastern Europe. And so they've done a lot of heavy lending here.
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