Possible new sources of the financial contagion

Roubini's RGE Monitor reports that EU banks are not looking so safe, and that their collapse will not be supported by their home countries, many of whom have smaller economies individually than the US.

• Daniel Gros/Stefano Micossi: The “overall leverage ratio” - a measure of total assets to shareholder equity - of the average European bank is 35 due to large in-house investment banking operations, compared with less than 20 for the largest U.S. banks. This means that relatively small writedowns on their assets could have a devastating impact on a bank’s capital--> some EU banks have become too big for any one European country to save while an official cross-border crisis management mechanism with ex ante burden sharing is not in place.
• The crucial problem on this side of the Atlantic is that the largest European banks have become not only too big to fail, but also too big to be saved. For example, the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to about €2,000bn (more than Fannie Mae) or more than 80 per cent of the gross domestic product of Germany. This is simply too much for the Bundesbank or even the German state
  

What are the implications of RGE's analysis? A US bailout is useless if a world contagion can just as easily start in Europe. Maybe we need to start looking at the alternatives. Prof. Roubini gives his idea here.