Indeed, a recent study by Bruegel found that, during the crisis, credit and capital markets absorbed only about 10% of the shock to GDP in net terms.7 By contrast, in the US it has been estimated that capital and credit markets smooth around two-thirds of a given shock.8 What might be the reason for the lack of risk diversification in the euro area?
In my view, on top of the lack of cross-border bank lending, the problem stems from the underdevelopment  3  Ryan, R., O’Toole, C. and McCann, F. (2014), “Does bank market power affect SME financing constraints”, Journal of Banking and Finance, January.