LONDON (Dow Jones)–Governments and central banks around the world have provided $11.4 trillion in support to banks and other financial firms in an effort to stem the financial crisis, economists at the Organization for Economic Cooperation and Development have calculated.
The final cost of bailing out the financial system won’t be known for several years, since not all of those guarantees will be called on, and the ultimate value of the assets and equity stakes purchased by governments will change over time. On the other hand, it is still possible that even more help will be needed.
But if everything that could go wrong did go wrong, the OECD’s calculations give some estimate of how much taxpayers would have to come up with under current schemes.
In a paper released on its website last week, the OECD economists calculated that as of October last year, governments had provided $1.5 trillion in capital injections and capital facilities.
They provided a further $5.2 trillion through the purchases of assets and facilities to insure banks against losses on assets, and $4.6 trillion in debt guarantees.
Within the global total, European governments provided $4.27 trillion in support, while the U.S. government provided $6.428 trillion.
The sums involved in supporting the financial system are enormous. In 2006, the year before the start of the financial crisis, the total government debt of all of the European Union’s 27 members stood at EUR7.2 trillion.
Given that the world’s population was 6.7 billion in 2008 and has likely risen since, it amounts to a contribution of over $1,600 for every person on the planet.
-By Paul Hannon, Dow Jones Newswires; +44 20 7842 9491; [email protected]