Friday, September 25, 2015

IMF Says There are $1 Trillion (Euros) in Bad Debts in the Eurozone

The Wall Street Journal runs this article which says the IMF is calling on banks in the Eurozone to develop an action plan to deal with $1 Trillion Euro in bad debts. Below are quotes from the article.


Europe must urgently confront a growing mountain of bad loans if there is to be a revival in bank lending that is essential to the continent’s economic recovery, the International Monetary Fund said Thursday.
In the years following the financial crisis, a rising number of businesses and households around the world found it difficult to meet interest payments on their debts. But the IMF said the problem of nonperforming loans, as those debts are known, has become particularly acute in Europe.
“Given the urgent need to support Europe’s still tentative recovery, resolving NPLs expeditiously to promote new lending is of first-order macroeconomic importance,” the IMF said.
A report by the Fund’s staff said NPLs in the 28-member European Union stood at about €1 trillion (about $1.12 trillion) at the end of last year, more than double the 2009 level and equivalent to more than 9% of annual economic output. In the 19 members of the EU that use the euro, NPLs stood at €932 billion.
My added comments:
$1 Trillion in non performing loans (NPL's) seems like a lot to me. The IMF says the problem is "urgent" and that banks should look for ways to sell the bad loans at book value and take the losses. Nothing about this is going to quiet those who see another major global crisis coming in the future.

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