Under these circumstances, major banks are becoming more active in extending loans, while carefully evaluating the credit risks involved. However, credit demand for economic activities such as business fixed investment remains weak. In addition, firms continue to reduce debts as part of their balance-sheet restructuring measures.
To be honest, I was never totally convinced by the argument that there cannot be a European discussion on sovereign risk: the bank/sovereign nexus exists everywhere, but in the euro area it’s unique in its intensity and there is an acceptance that it has been a major contributor to the euro area crisis.