Something seems wrong- European bank leverage COTD

Europe’s economic troubles seem to be fading recently. The Euro has strengthened somewhat and fears about a European banking crisis courtesy of Greece (and Portugal,  Italy, Ireland, and Spain too- “PIIGS” as they are collectively called) have subsided.

In this chart from the Wall Street Journal (6/1/10), you can see that Europe’s big banks are more than twice as leveraged as their U.S. counterparts.  Not everything is equal, of course, but clearly European money center banks are less prepared to deal with economic trouble than one might think. This fact makes me wonder how Europe seemingly rebounded so fast from near-crisis conditions of a few months ago. While I’m pleased we aren’t in yet another crisis, it is fair to say I’m skeptical this is over.

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