Banks’ wholesale funding channels dried up: towards the end of the year their bond issues on international markets almost came to a halt. The tensions were reflected in the cost of funds and in the availability of credit. The flow of loans to firms slowed and turned negative in December.
There was a serious and real risk of a large, persistent contraction in bank lending. The crisis was tackled on three fronts. The authorities of the most exposed countries made substantial corrections to their public finances and prepared structural reforms to foster growth, interacting with the European authorities; in Italy the actions initiated in the summer were completed and reinforced by the new Government.