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FUTURE OF THE EUROZONE: The Consequences of the EU Bank Rescue. A Safety Net for the Creditor Banks

•, by Hugo Radice

Through the second half of 2011 there were persistent signs of financial stress in many banks right across Europe – not only in Greece, Ireland, Portugal, Spain and Italy, but in France and even Germany too. The banks were already struggling to meet the higher capital and reserve requirements that have been emanating from the Basel III international regulatory proposals, as well as to meet public expectations of a resumption in lending to help the economic recovery. But in addition, the continuing uncertainties about Eurozone sovereign debt led to a seizing-up of the interbank loan market, and the supply of term deposits and medium-term lending to banks, on a scale not seen since the 2007-08 credit crunch.

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