Both the euro and pound gapped lower in Asia at the start of weekly trade after a disappointing EZ summit failed to come up with any coordinated solution to the growing Eastern European debt problem which threatens many Western European banks. With nearly $400 Billion of consumer and corporate Easter European debt, most of it denominated in euros and Swiss francs, due to be rolled over this year, EZ financial institutions face a specter of massive loans defaults unless some sort of a restructuring deal is reached.

A threat by Moody’s Investor services to downgrade those European banks that have strong exposure to Eastern European markets sent the EUR/USD sharply lower in very early Asian trade today. According to Bloomberg, banks from Austria, Italy, France, Belgium, Germany and Sweden account for 84 percent of western European bank loans in Eastern Europe.