Lack of capital, weak profitability or rising non-performing loans lead to lower credit provision or higher interest rates being charged on new loans to offset losses elsewhere. But it is governments that have to deal with this problem through recapitalisation and restructuring. In other words, without actions from governments, we will not be able to reintegrate financial markets. Fortunately, positive progress is being made.
The Commission projects the euro area fiscal deficit to fall below 3% of GDP this year – less than half the peak reached in 2009.