Germany's finance minister Peer Steinbruck put the G7's latest estimate of subprime losses at $400bn, according to the Financial Times. The problem with this estimate is that neither he nor any of his G7 colleagues seem to have any idea where the losses are, or how they arrived this number. The G7's increasingly strained optimism on global economic growth also appears increasingly stretched. Mario Draghi, governor of the Bank of Italy and head of the Financial Stability Forum, said the next two weeks would be crucial as the first audited accounts are coming in. Draghi also said that it may be that public sector would have to step in to recapitalise the banking system.
Il Sole 24 ore reports from Tokyo that Draghi said there were so far no signs of a credit crunch in the euro area, as the availability of credit remains strong.
Meanwhile, there are signs that conditions on the credit market have been worsening dramatically since the beginning of the year. The CDO markets has effected evaporated, with only three contracts traded in January, worth $1.3bn. This compares with 37 deals worth $22bn in January 2007, according to an FT report quoting Morgan Stanley.