What will be the next big “event” shock to come out of Europe?Waverly Advisors suggests watching municipal debt:
Eurostat lists local government debt at less than 5.5% of GDP for the full union. In Greece, the estimate is that municipal borrowing is less than 1% of total consolidated government debt. Although the extent of local government borrowing varies widely between nations, these estimates appear absurdly low to us. If the swaps related lawsuits brought by Italian cities Milan and Cassino against investment banks over billions in losses last year are any indication, municipal creditors in some EU nations have been employing credit derivatives actively. The possibility that a city or province might have a significant localised crisis brought on by heretofore opaque debts is real, particularly in Italy.
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