Investors concerned over German banks' exposure to southern Europe

Investors and economists have identified German banks’ exposure to Europe’s indebted peripheral sovereigns as a potential risk to state finances.

A recovery in world trade has meant the export-driven German economy is performing well in 2010, even in the midst of the sovereign debt crisis in the Eurozone. But some commentators say German banks’ exposure to Europe’s beleaguered peripheral sovereigns is a cause for concern.

“My big worry for Germany is southern Europe, and the consequences for the German banking sector if they did let Greece default,” says Michael Burda, professor of economics at the Humboldt University of Berlin.

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