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Has the ECB taken on too much?

As the European Central Bank continues to attempt to find a way through the financial minefield of Europe it has been revealed that current liabilities are way in excess of the bank's capital and reserves. It is believed that the ECB has around EUR77.3 billion in capital and reserves although at the end of April the exposure to the Greek economy and the Greek banking system was an excessive EUR88.4 billion. When you also take into account an additional EUR25 billion investment in Greek government bonds, although partially backed by "strong" Greek assets, the situation does not look very good.

As a consequence, there is no doubt that the ECB will at some stage need to raise additional finance from EU members and other financial associations. This is perhaps one of the cold hard facts which are upsetting investors in the European markets with additional financial support likely to be required by other economies such as Spain, Portugal, Ireland and possibly the UK. At this moment in time it is difficult to be certain that the ECB would be in a position to offer this additional support.

Those who believe that the European debt problem will go away in the short-term may well need to think again. This is a structural issue within Europe which needs be addressed as soon as possible in order to avoid a complete collapse of the European Union.

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