Europe's largest economy, Germany, saw the first signs of trouble approaching in August 2007 when IKB, a Dusseldorf-based lender, had to be rescued after suffering losses on its US subprime investments. Following this incident, it seemed for a while that German banks had avoided the crisis, until the state had to step in and rescue the Hypo Real Estate bank in 2008 when its loans to Eastern European mortgagers dried up. This sounded the alarm that other, bigger German banks were still exposed to the East through their loans to Austrian banks, which in turn lent that cash, equivalent to over 70 percent of Austrian GDP, to Eastern European mortgagers whose currencies were now rapidly losing value.

Mark Blyth, Austerity, loc. 154