It Must be a Matter of Style and Élan

How is it that Europe Inc’s drunken sailor spending bears so little mention?

Europe Inc. Old World companies, from cement makers to chemical producers, went on a borrowing spree over the past decade that left them deep in the red. Corporate debt in the euro zone stands at more than $11 trillion, equaling some 95% of the region's annual output. U.S. corporate debt, by contrast, is about 50% of the economy.

Just as with subprime mortgages in the U.S., risky corporate loans were repackaged and sold to investors. Now hundreds of billions of dollars in payments are coming due as sales slump in the global economic crisis. In better times companies might have gone to their bankers to refinance. No more. Bank lending to euro zone companies plunged 40% last fall as credit tightened.

Much as the dozen Euro-feeder funds that enabled Bernie Madoff to launder his ill-gotten gains into the opaque wilderness of unregulated Eurasian finance seem to bear going unmentioned, so it seems does what the leaders of those European industries, the ones so often called social-market oriented and concerned with the population in contrast to the “cavalier” yanks and their lack of government command and control over the economy. Pfft! Don’t say that! It doesn’t fit the image!

The shock waves could ripple through global markets. S&P estimates that over the next two years, 150 European companies could default on a total of $65 billion in loans. In recent years, "there was a flood of cheap debt, lower and lower terms," says Jon Moulton, head of London private equity group Alchemy Partners, "and with less and less due diligence."

Just try hiding THAT weenie, or the inane lectures about “cowboy capitalism” from those who know so little about the world that they can’t tell the difference between failure and fraud.