The re-nationalization of eurozone lending

While most analysts have been focused on credit growth which has re-emerged after the sovereign debt crisis, cross border inter-bank lending has decreased, fragmenting the euro zone along national lines. In a crisis scenario, one should expect that fragmentation to increase dramatically, putting extra stress on national central banks and increasing financial fragility in the eurozone’s periphery.

While most analysts have been focused on credit growth which has re-emerged after the sovereign debt crisis, cross border inter-bank lending has decreased, fragmenting the euro zone along national lines. In a crisis scenario, one should expect that fragmentation to increase dramatically, putting extra stress on national central banks and increasing financial fragility in the eurozone’s periphery.
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