Next sovereign crisis will be 'too big to bail'

EUROPE

In Europe, size matters. Individual countries may be small, but Europe's banking system is the largest in the world, more than 3.5 times that of the US.

Europe is desperate to defy the historical pattern of big banking crises leading to sovereign debt crises and then back to further banking crises. Greece, the latest sovereign debt casualty is also the largest in GDP terms compared to its recent peers: Iceland, Hungary, Latvia, Estonia and Ukraine. This long list of bailed countries has given rise to a “bail-out culture”. A complacency that the IMF or Germany or Abu Dhabi or someone will always be there to step in. The reality is that the next sovereign crisis will be too big to bail. As Greece teetered on the brink, policymakers at t...