Europe's Financial System Prepared for the Wrong Crisis
Banks may pass the tests but nonbanks gated liquidity and USD collateral chains fail first when AI power limits and refinancing walls collapse valuations.
Twenty-five percent. That is how much of Europe’s climate catastrophe losses are insured. In Italy and Greece, coverage drops below five percent. When the floods come, insurers pay what they must and retreat.
The rest falls on people who cannot afford it.
The European banking sector is prepared. Stress tests passed. Resolution mechanisms ready. The Single Supervisory Mechanism. The Single Resolution Mechanism. Impressive theater for the institutions that will survive.
Too bad the hit probably lands somewhere else first.
Risk moved to private credit funds and real estate vehicles. Places where retirement savings sit. Where pensions are parked. Where regular people were told their money would grow safely.
The true threat profile is not a solitary fracture, but the synchronization of accumulated structural fragilities.
Start with what happens when the grid says no.
In Ireland, data centers already consume eighteen percent of national electricity. Regulators stopped approving new connections.
The market priced artificial intelligence growth with absurd confidence. Pension funds bought into utilities and infrastructure companies because advisors said they were safe bets on the future.
Grid access is a queue measured in years, not quarters. Permits crawl. When investors realize capital cannot be deployed at the pace valuations assumed, the repricing will be violent.
Land zoned for data centers without power access becomes expensive dirt. Funds holding these assets will face immediate write-downs.
Guess who owns those funds.
Pension accounts. Insurance policies. Retirement portfolios. The savings of people who did everything right. Who worked. Who saved. Who trusted.
