Would you give money to someone in debt?

Tough question I guess. You would ask yourself what is the possibility of them paying you back.

How would you feel if the money you give was guaranteed?

I think you would step up.

Now here’s the problem. Bond holders to the troubled economies of Greece, Ireland, Portugal and Spain have been offered unwritten guarantees. They have been banking on Germany stepping in to help bailout Europe’s laggards.

The lady who triggered the latest crisis that has Ireland taking its begging bowl to the European Union and International Monetary Fund is at it again. And she’s right.

German Chancellor Angela Merkel said:

Have politicians got the courage to make those who earn money share in the risk as well? Or is dealing in government debt the only business in the world economy that involves no risk? … This is about the primacy of politics, this is about the limits of the markets.

That sent the borrowing cost for most eurozone countries to record highs.

The question is: Can Merkel say enough is enough and bankers need to take a serious haircut (losses)?

Let’s just take a look at what German banks and financial institutions are owed by these countries and thier banks, businesses and residents.

Germany’s exposure to Greece is $51bn; to Ireland $205.8bn; to Portugal $46.6bn; and to Spain $217.9bn. That’s according to figures published by the Bank of International Settlement.

In total Germany is on the hook to the tune of $521.3bn.

The world’s exposure to above nations actually rose 4.3 percent to $2.6tn.

My final question: Will Merkel stand back and let German banks take huge losses?