Bloomberg News

EU Risks Lehman-Style Crisis This Fall, Premier Orban Says

October 11, 2011

(Updates with comments from Orban in second, fourth paragraphs.)

Oct. 11 (Bloomberg) -- The euro area may be engulfed in a crisis in the next two months similar to the one the U.S. faced in 2008, Hungarian Prime Minister Viktor Orban said.

“There is a serious risk the October 2008 U.S. financial crisis will be repeated in the euro area this fall,” Orban said in a speech in Parliament today. “It’s obvious that the European banking system needs to be fully recapitalized.”

European leaders yesterday pushed back a crisis summit on dealing with Greece’s debt woes and shielding banks from the fallout amid German plans for a deeper-than-planned writedowns of Greek bonds. Lehman Brothers Holdings Inc. filed the largest bankruptcy in U.S. history on Sept. 15, 2008, triggering economic turmoil that thrust the U.S. and the euro area into recessions and forced countries including Hungary to obtain bailouts to avert defaults.

“Everyone knows that Greece’s debts can’t be repaid, though it’s not customary to speak as harshly about this as I just did,” Orban said.

European leaders delayed their Oct. 18 meeting until Oct. 23. Europe needs a strategy for shoring up banks before unstitching a July accord to cut Greek bond values by an average of 21 percent, Belgian Prime Minister Yves Leterme said yesterday. Luxembourg Prime Minister Jean-Claude Juncker yesterday said the writedowns may exceed 60 percent.

--With assistance from James G. Neuger in Brussels and Gabi Thesing in London. Editors: Jennifer M. Freedman, Paul Abelsky

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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