FRANKFURT: The European Central Bank raised on Friday its estimate of euro zone bank write-downs from the financial crisis to 553 billion euros ($796 billion) owing to new real-estate problems and loan risks in Central and Eastern Europe.
ECB Vice President Lucas Papademos also pressed Greek authorities to take “decisive, substantial” and “courageous” measures against their swollen fiscal deficit, an issue he said was in fact “really global.”
In its twice-yearly Financial Stability Review, the central bank raised its forecast for the devaluation of bank assets from the financial crisis in the period 2007-2010 from a previous estimate of 488 billion euros.
That was the result of “increasing write downs on exposures to commercial property and the inclusion of write-downs on securities issued by Central and Eastern European countries,” the report said.
Commercial property sector problems looked set to overtake household mortgage issues as a major drag on bank earnings within the 16-nation bloc, with Papademos telling a press briefing: “There was both a significant and widespread decline in (commercial real-estate) values in euro area countries,” since the last review.
More Eastern and Central European consumers could default on loans in foreign currencies like the Swiss franc meanwhile as a rise in value by such currencies increased the amounts that had to be paid back.
Meanwhile, the euro zone’s trade with the rest of the world showed a hugely increased surplus of 8.8 billion euros ($12.7 billion) in October from 0.9 billion euros in September, official data showed on Friday.