Dexia’s collapse is like Lehmann Brothers. It’s starting a domino effect in France, Belgium, Luxembourg, Greece, and even Austria. Other banks are now showing signs of extreme stress.
The Erste Group issued surprising profit warnings because of its exposure to sovereign debt. If many more banks follow suit, Europe may be pushed into a recession.
So far only Germany is resisting the general trend. When Germany slips, Europe will be in recession that may become worldwide. That is why the summit of European leaders has been postponed until October 23.