EUROPE could be blown apart by a toxic cocktail of risks brewing within the bloc's financial system, according to the Wall Street trader who correctly predicted the 2008 financial crisis.
Steve Eisman, who inspired Hollywood film The Big Short, has warned Italy's crippled lenders and large amounts of sovereign debt held by European banks are among the reasons the continent is facing total meltdown.
The most immediate threat comes from the staggering £270billion worth of bad loans held by Italian banks, according to the legendary investor, who made £81million ($1bn) by betting against banks in the run up to the financial crash in 2008.
While the guru said he wasn’t worried about Britain’s banks, he laid out a grim future for Europe.
The most immediate threat comes from the staggering £270billion worth of bad loans held by Italian banks, according to the legendary investor, who made £81million ($1bn) by betting against banks in the run up to the financial crash in 2008.
While the guru said he wasn’t worried about Britain’s banks, he laid out a grim future for Europe.
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He said: “Europe is screwed. You guys are still screwed.”
The guru said Italy's lenders are trapped by the so-called non-performing loans.
He added: "In the Italian system, the banks say they are worth 45-50 cents in the dollar.
"But the bid price is 20 cents. If they were to mark them down, they would be insolvent.”
Mr Eisman also sounded the alarm over the amount of government debt - sovereign bonds - held by financial firms on the continent.
He said: “What is very negative is that in every country in Europe, the largest owner of that country’s sovereign bonds are that country’s banks."
At the same time, the investor expressed concern over Deutsche Bank, which has seen more than half of its value wiped this year over fears of a looming £11.3billion ($14bn) fine from US regulators.
The guru said Italy's lenders are trapped by the so-called non-performing loans.
He added: "In the Italian system, the banks say they are worth 45-50 cents in the dollar.
"But the bid price is 20 cents. If they were to mark them down, they would be insolvent.”
Mr Eisman also sounded the alarm over the amount of government debt - sovereign bonds - held by financial firms on the continent.
He said: “What is very negative is that in every country in Europe, the largest owner of that country’s sovereign bonds are that country’s banks."
At the same time, the investor expressed concern over Deutsche Bank, which has seen more than half of its value wiped this year over fears of a looming £11.3billion ($14bn) fine from US regulators.
He said: "The European regulators have been much more lenient than the US regulators.”
However, the investor believes financial firms in Britain are not a cause for concern.
He said: “I’m not really worried about England’s banks.
“They are in better shape than most in Europe.”
http://www.express.co.uk/finance/city/734694/Europe-is-SCREWED-big-short-trader-predicted-2008-financial-crisis
