Title

Europe and the Asian financial crisis : coping with contagion

Document Type

Journal article

Source Publication

Asian Survey

Publication Date

1-1-1999

Volume

39

Issue

3

First Page

456

Last Page

467

Publisher

University of California Press

Abstract

In addition to FDI, Europe has also been increasingly committed to the region through loan activities. European banks were themselves heavily exposed to some of the countries most at risk and have been forced to undertake serious discussions with both Asian governments and companies to set up private-sector rescue packages to sort out short-term debt repayment problems. Overall, according to figures released by the Bank of International Settlements, on the eve of the crisis in June 1997 European banks held US$365 billion in loans outstanding to Asian banks and companies, more than the total of the American ($275 billion) and Japanese banks ($45 billion) combined. European banks, therefore, have not only tried to reduce their exposure to Asia but also had to be involved in arrangements, such as those worked out in early 1998 for Thailand and South Korea, to roll-over loans rather than seek a formal debt rescheduling. Worries about Asian Pacific regional financial stability are certain to continue for the European financial community. While no European banks are likely to be bankrupted by their Asian commitments, their earnings and profits are being hit. Germany's Deutsche Bank, for example, which is estimated to have had about $16 billion in loans outstanding in a total of eight Asian Pacific countries in mid-1997, suffered a 57% fall in its net profits during 1997 primarily because of its exposure in Asia.

DOI

10.2307/3021208

Print ISSN

00044687

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