Uncertainty regarding the European debt problem remains, even though the extreme tail risk of a potential disintegration of the euro, which some had feared at one time, has receded. However, market tensions could rise yet again if efforts to strengthen economic and financial union of the euro area and to push through fiscal reforms are seen to be in retreat.
The squeeze came on both the liability side of bank balance sheets, in the form of more-attractive savings vehicles such as money market mutual funds, and on the asset side, with the growth of public capital markets and international competition.