EU Banks Owe Trillions : Planet Money Banks in Europe will have to refinance loans or reduce their borrowing. Here's why that could choke off the economic recovery in Europe.
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EU Banks Owe Trillions

The world's banks need to pay back some $5 trillion in debt in the next couple years. About half is owed by banks in the euro zone, the NYT reports.

Investors are already nervous about lending to EU banks, in part because the banks hold lots of bonds issued by countries in fiscal trouble (Greece, Spain etc.).

That means the banks could face one of two scenarios: Borrowing at higher interest rates to pay off their debts that are coming due, or paying off the debts without taking out new loans.

Both scenarios would leave banks with less money to lend out. That, in turn, would reduce the credit available to individuals and businesses in Europe.

While that sort of deleveraging could be healthy in the long term, the reduction of credit in the short term could choke off the economic recovery.

European bank regulators are conducting stress tests of EU banks -- a program similar to the one that helped restore confidence in U.S. banks in the spring of '09.

But, citing the banks' big debts, WSJ argues that European bank regulators need to be more forthcoming about the details of the stress tests -- and in particular, to disclose how much the regulators assume banks could lose if Greece, Spain or other countries default on their bonds.

For a broader look at the EU -- and the perennial tension between national sovereignty and a multinational currency -- listen to Sylvia Poggioli's story on today's Morning Edition.