European Perspective In Brief - September/October 2014

Europe has struggled mightily during the last several years to triage a long series of critical blows to the economies of the 28 countries that comprise the European Union, as well as the collective viability of eurozone economies. Here we provide a snapshot of some recent developments regarding insolvency, restructuring, and related issues in the EU.

Portugal—Banco Espírito Santo SA ("BES"), Portugal's second-largest lender, will split up under a rescue plan backstopped by €4.9 billion ($6.6 billion) in state money after the bank sustained devastating losses on its exposure to the troubled Espírito Santo financial group ("Espírito Santo"). Under the "resolution measure," the healthy assets and businesses of BES will be spun off into a new bank ("Novo Banco," provisionally), while problem assets will remain with the vestigial entity and losses will be borne by shareholders and subordinated creditors. Novo Banco will be recapitalized by Portugal's central bank and