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Banks―and the loans they provided in the run-up to the crisis―are at the heart of Europe’s problems today.
Yet it would be wrong to conclude that the crisis was caused by too much financial integration. In fact, the real problem may have been that there was too little financial integration.
Policies to promote deeper integration of Europe’s banks―including through cross-border merger and acquisitions―should be part of the solution. (more…)
Filed under: Economic outlook, Europe, IMF, International Monetary Fund | Tagged: banks, capital flows, cross-border mergers and acquisitions, current account deficits, European Union, external debt, financial integration, financial sector, fixed exchange rates, foreign exchange risk, interest rates, market failures, Regional Economic Outlook: Europe, regulatory and supervisory frameworks, sovereign debt, sustainable growth, the euro | 3 Comments »