Speaking at a fringe meeting at the Conservative conference in Birmingham today, Hammond warned that many of the large European banks are behind the UK and the US in the economic cycle and have therefore yet to declare substantial amounts of bad debt.
Hammond said: “The Euro and the Eurozone may be looking rather smug at the moment and I don’t mind at all that all those people who Gordon Brown was having a right smirk at his difficulties.”
But he said: “Most of the big German and French banks have not started to take a hit yet. They are way behind the curve of US and UK banks, so the smugness may be about to evaporate.
“I suspect that because the window that it operates is quite wide, the ECB may end up becoming the biggest toxic bank of them all.”