No FDIC in the Eurozone
Almost key graph:
One member of the audience, though, had a really good question: what happens to the European system of sovereign guarantees of interbank lending? When those sovereign guarantees aren’t worth much any more, Euribor is likely to spike, since suddenly there’s a lot more credit risk involved in interbank lending. And there are hundreds of trillions of euros of debt contracts linked to Euribor, which could suddenly get very expensive and take control of short-term interest rates out of the hands of the ECB.Correct, which is what happened to Lehman. It misses the mark though by not wondering about deposit insurance which cannot be credibly supplied in today's Eurozone.
That is correct -- the EU has no deposit insurance. It's almost enough to stock up on Gold.