Intra-European cross-border lending – which had been growing by 25 per cent per year in the run-up to the crisis – has been falling at a rate of 10 per cent per annum since. While the European Central Bank (ECB) has adroitly stepped into the breach, reliance on central bank lending is not a recipe for robust private investment.
Bold steps are required to restore the single financial market. And bold steps are now under consideration. One example is the current European proposal to create a banking union.