About every two weeks the snark arrives, the hairs grow on my hands, and like Alte, I try to imitate Ferd’s prose, crossed with Tyler West. My big worry at the moment is not which poor sucker is going to lead the Labour party, but Europe.

I live in New Zealand. This means that we have some shelter from the worst ravages of the global economic turmoil. New Zealand can easily feed itself — instead the issue for most of us is portion control, not food quality.

However, our banks are exposed to toxic debt from Europe and the Americas. Despite this, S&P are downgrading our banks.

The historic downgrade by international ratings agency Standard & Poor’s largely stems from its new criteria for risk measurement. The biggest impact is that it will increases funding costs for the banks.

S&P cut the long-term ratings on Commonwealth Bank of Australia (which owns ASB), Westpac Banking Corp, National Australia Bank (which owns BNZ) and Australia and New Zealand Banking Group (ANZ) from ‘AA’ to ‘AA-’. The outlook remains stable.

Those banks have taken pride in their strong ratings, which helped shield the Australian and New Zealand economies from the worst of the global financial crisis.

Despite the harsher outlook from S&P, the Australian banks remain among the highest ranked banks in the world.

Compared with the rest of the world, Australia and New Zealand are both rich and small. Our small population means that there is a lack of critical mass (there are more Germans than ANZACs). And housing — much of our banks portfolios is mortgages on residential property — is unstable.

The risk of NZ becoming involved in baling out the European is limited to our contribution to the special drawing rights and the New Arrangements to Borrow. This could add up to 1.8 billion — when we are running a deficit. In short, we would have to spend what credit worthiness we have to throw good money after bad.

Finance Minister Bill English on Tuesday said the New Zealand government expected to be part of any discussions regarding any IMF intervention in Europe.

“We do all have a common interest in Europe finding its way through its problems. The IMF has played a growing but still constrained role in that,” English said.

“We have some say. We’re a contributor, we’re effectively a shareholder. I think there would be a collective sense that if the IMF can reinforce European efforts, then there may be a role there. But it is absolutely vital that Europe takes responsibility for the costs and consequences for its own actions. You wouldn’t want to see the IMF moving in to replace that responsibility,” he said.

I disagree with Bill: he is not bloody-minded enough. I think we should get out of any agreement with the IMF as soon as possible, and let the banks who have bad loans fail.

This will hurt, but letting the situation continue will remove what trust remains in the financial system, reducing us to the equivalent of a cash-only economy. This would be painful for NZ, but letting the toxic practices of Europe in would be far worse.