A corporate liquidity crisis in the trillions of euros is shaping up in Europe, due to the energy-price and other producer-price hyperinflation. The problem is margin calls for collateral in commodity trading, as it was in March and April, but now the demands are so large—due to inflation by an order of magnitude in the meantime—that banks are not willing nor would be capable. These are supposedly “only” demands for liquidity, but if companies are forced to try covering the demands on their own, they shortly become insolvent.
The UK joined the parade on Tuesday with incoming Liz Truss promising £150 billion in aid in paying bills of all kinds—company, household, local government—over several years. Switzerland also joined on Tuesday with an announcement that Axpo, a large energy utility, had been extended a government credit line of 4 billion francs (equal to $4.1 billion) for urgent liquidity needs. But the government bailouts, which have been in the billions or low tens of billions of euro thus far, are still not in the ballpark.
