What's at risk for Europe's taxpayers?

French Economy minister Christine Lagarde (second right) and Christian Noyer (left), governor of France's central bank, leave the Elysee Palace in Paris after a meeting between French President Nicolas Sarkozy and bank directors -- October 14, 2008.

TEXT OF STORY

Bill Radke: As we've said, the bank stock plan, inspired by the British, and major European countries doing more of the same. The question is, how are they going to pay for this? Here's Marketplace's Megan Williams.


Megan Williams: Europe's rescue packages so far have been good news for investor confidence. But that's not necessarily the case for taxpayers, who'll be footing the bill -- and assuming big risk. Germany's bailout will cost almost $700 billion. The French price tag is set at about $400 billion, and Italy can't even fathom a guess yet.

Euro expert Francis X. Rocca says governments are basically using taxpayer's money to bet on the future of the banks. If the economy improves, it will net dividends.

Francis X. Rocca: But if things don't work out, it's going to mean much higher debt levels -- not only as a direct effect of the losses, but as a snowballing effect of the credit ratings.

That could lead to government's cost of borrowing going up, says Rocca, and private investment and the economy down.

I'm Megan Williams for Marketplace.

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