Bent Sørensen teaches international economics at the University of Houston. Sørensen says the risk of a euro zone crack up is a bit exaggerated. But he says investors’ fears of such an event could take on a momentum of their own. He compares the situation to the 2008 financial crisis, with sovereign debt filling the role once played by mortgage-backed securities.
“Given that the banks might be at risk, and given that the political environment is not such that a second bailout is going to come very easily, there is a risk to the financial system.”
Banks with headquarters in the euro zone, the United Kingdom and Switzerland would be the most vulnerable in the event of a euro zone break up. Those with a large presence in Houston include Spain’s BBVA, France’s BNP Paribas, Royal Bank of Scotland and Credit Suisse First Boston.
It’s likely, though, that a major shock to the euro zone would ripple throughout the global financial system. Houston businesses and consumers would, at the least, suffer a severe credit crunch.