August 11, 2009

Study: Bailouts in Europe risk future debt

European regulators have approved bank bailouts valued at up to 231.8 percent of a member state's gross domestic product, a European Commission report said.

Nine of the 27 EU member states, including Bulgaria, Cyprus, the Czech Republic, Estonia, Lithuania, Malta, Poland, Romania and Slovakia, have not applied for permission to bail out banks at all, while Ireland was approved for bailouts worth more than twice the country's GDP, the EUobserver reported Tuesday.

Between October and mid-July, regulators approved of $4.1 trillion in state aid to financial firms, while also injecting $442.6 billion in the banking system, the report says.

The report says that some member states have risked high future debt loads to see their banks through the financial crisis.

This implies increasingly explicit future public debt levels or implicit future debt levels, the report said.

In total, the report valued the support given to banks at almost a third of the 27-member states' GDP.