Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

Whereas in 2007 eurozone bond investors had regarded Greek debt as equivalent to that offered by Germany, by September 2011 the CDS spreads on Italy and Spain were higher than those of Egypt in the throes of revolution.53 The three countries in the world judged most likely to default were all in the eurozone—Greece, Ireland and Portugal—well ahead of Belarus, Venezuela and Pakistan.54 The revolutionary mood seemed to have jumped the Mediterranean. The violent scenes in Athens fed fantasies of social disorder spreading across Europe. Supposedly serious financial analysts were talking of “hyperinflation, military coups and possible civil war.”55 But it wasn’t any longer a matter of individual predatory hedge funds, or one or two overexcited analysts talking the euro down; commercial banks and pension funds from across Europe and the United States were pulling tens of billions of euros out of Italy and the program countries.56 Once eurozone sovereigns lost their standing as issuers of safe assets, institutional investors had no option but to reallocate their portfolios. And that affected the European banks too. In the summer of 2011 wholesale funding was drying up.57

Some crazy stats