I think Germany and France will use the crisis to put negative pressure on Switzerland to amend banking secrecy. The biggest loser if Eastern Europe defaults is Switzerland. Who could see UBS - or their currency - go under. Switzerland is too small to absorb the expected losses by printing. Only a bailout syndicate led by Germany could viably save Switzerland. Hence the political capital or gun to the head.
Suppesedly Switzerland's direct loan exposure to EE/CEE is not as bad as others'. It seems Italy, Germany and Austria (first their banks, thus their economies) are much more at risk here. From: http://zerohedge.blogspot.com/2009/02/glance-at-upcoming-eastern-european.html
The Absolute Return Letter Europe On the Ropes March 2009 http://www.arpllp.com/core_files/The Absolute Return Letter 0309.pdf
I'm hearing in Poland the wave of foreclosures is just starting...worst hit are those who took out the loans in USD about a year ago, thinking it will sink even further....
The graphs above should be treated with care. What they show is what BIS calls 'total foreign claims' of Western European banks in the CEE countries (that's the often cited $1.5trn figure). However, not all 'foreign claims' are created equal. It's important to distinguish between proper 'cross-border' claims and 'local claims of foreign affiliates'. The latter comprise arnd 60% of the $1.5trn exposure and are claims by the Western European banks' local subsidiaries against local assets. These claims are largely covered by the local deposits. The moral of the story is that a sharp domino-effect sort of blowup is not very likely in the immediate future. Another important point is to distinguish between the different members of the CEE community. Clearly, all signals suggest that Hungary is the weakest link, with Czech Republic and Poland actually doing more or less OK.