The alarming news came earlier this week when an auction of German government Bunds flopped.
Europe’s banks now have a very little access to wholesale funding and banks refuse to lend to each other. Companies are withdrawing deposits from peripheral countries’ banks thus forcing these banks to sell more assets or reduce lending. This snow-ball effect creates a Credit Crunch 2.0 like situation.
Leaders of France and Germany discussed the idea of EU fiscal union but this was not enough to calm the markets.
Source: GlobalRisk Community