In a word, Next

While not 100 percent, the bug looks set to jump the Atlantique:

What is more, about $1.4 trillion of bank debt falls due in Europe this year and next, just as bondholders have received their first big blow of the crisis thanks to Lehman’s demise. Worries about how HBOS, a British bank, would roll over its wholesale obligations forced it into the arms of Lloyds TSB on September 17th. Other banks, notably in Spain, Iceland and Scandinavia, are even more dependent on the wholesale markets. The ECB plans to impose stricter conditions on its lending in February but that will be difficult while confidence remain so low. Mr Paulson may yet have some imitators across the pond.

Of course, Europe will do this without an underlying "real" economy to fall back upon and with the required assent of at least 15 (Eurozone) if not the full 27 member states in order to proceed on the scale required. That trick may make the process of the Democrats and Republicans look lightening fast and hyper-cordial. Juncker is no doubt loading up on the smokes.

Readers of this blog will note a sliver of a silver lining should this happen: Spain is experienceing high inflation, low productivity, and a housing bubble deflate. The Zapatero pip is set to squeak.