Hold on to your US debt, Europe is going to get even worse!

European banks have a different problem. Their loans have typically not been a problem in the mortgage sector due to more stringent lending policies relating to mortgages. Some lenders only provide 50% of the purchase/appraisal price, so they do not have the same issues as US banks.

But, and there is a very big BUT.....their problem rests with corporate borrowers.

European corporate debt that matures this year (2009) totals $800 BILLION, versus $620 billion in the USA.

The worldwide slump in business will force the European borrowers who gorged on the low interest rates, and borrowed significantly to make acquisitions at their highest values, to do massive restructurings or bankruptcies.

MOODY's the ratings agency, already downgraded 230 major Western European companies, especially those in Germany Spain and France.

For instance, Paris based LaFarge, the world's largest cement maker has $22 billion in debt, and last year paid $11 billion for a Egyptian cement company.

Private equity in Western Europe is worse off. Carlyle group acquired a big $1.2 billion revenue German auto-parts group that filed for bankruptcy.

It is forecast that at least $75 billion in loan defaults from about 150 companies will occur in the first half of the year.

The defaults will trigger more problems with the banks, who in turn will turn to their governments, who in turn will turn to their taxpayers, etc., etc.; like dominoes falling down.

Bank lending in the EURO ZONE had tightened to the point of 80% reduction of credit availability as credit policies have gotten tougher.

The borrowers are all mostly major industries like chemicals, building materials and major manufacturing of machine and electronic components.

Oh, oh.....hold on the sucking sound is just starting. Shock waves will sound throughout the global markets.