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The fear is that some of those loans have already been called in by foreign creditors worried by gathering clouds over Europe.

Bank Credit Analyst estimates that US$1.2-trillion of debt could be sucked from the global economy next year as lenders move to boost capital in a bid to stay solvent, resulting in a 2% drag on global demand.

Meanwhile, Spain and France have come under pressure amid speculation they are next in line. Both took a drubbing in the bond market on Thursday.

“People are running to cash,” said Alec Levine, an equity derivatives strategist at Newedge Group SA in New York, told Bloomberg News. “The markets, not the policymakers, are controlling events right now and that’s a very dangerous place to be. We’re seeing every type of assets in the world being sold right now except for Treasuries.”

The S&P/TSX Composite slipped 259 points, or 2.13%, as investors sold off banks and gold stocks. The Dow Jones Industrial Average dropped 135 points, or 1.13%, while the S&P 500 tumbled 21 points, or 1.68%.

European banks are “experiencing extreme financial stress with assets falling in value and capital cushions coming under pressure due to Greek government debt writedowns, sliding eurozone bond values and slowing economic growth,” RBC Capital Markets said in a note. “This has resulted in capital adequacy coming into question.”

Many of Europe’s problems could be solved if the European Central Bank were allowed to become a lender of last resort, effectively turning on the printing presses to support struggling members. But that’s something German Chancellor Angela Merkel has staunchly opposed amid fear that the strategy could result in the kind of runaway inflation that hit Germany after the first world war.