The free fall in Turkish Lira is seen as a factors that heavily weighing on Euro today. It’s reported that ECB officials are increasingly worried about contagion from Turkey, due to the deep tie with Eurozone financial system.
According to Bank for International Settlements data, Spanish banks are are owed USD 83.3B by Turkish borrowers; French lenders are owed USD 38.4B; and banks in Italy are owed USD 17B. Meanwhile, the Financial Times noted that Spain’s BBVA, Italy’s UniCredit, and France’s BNP Paribas could be particularly impacted by the ongoing depreciation of the lira.
It’s seen that a complete banking crisis in Turkey will inevitably have huge impact on Eurozone banks, and even trigger credit crunch. Though, such a worst case scenario is seen as unlikely so far.
While the impact on Euro is significant, European stock indices are also trading broadly lower. At the time of writing, DAX is down -1.54%, CAC down -1.11%, FTSE down -0.62%. It’s not that much a disaster so far.
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