The increasing mistrust of Europe’s banks is threatening to drag down the continent’s already sluggish economy and prompting new worries for American financial firms that do business with their European counterparts.
The concerns about the health of Europe’s financial firms are making it harder for them to raise money. In turn, they are under pressure to charge more for loans they offer to businesses and consumers on the continent.
The trouble in the European banking sector comes at a time when policymakers are already struggling to address the continent’s spreading debt crisis and stalling economic growth. New indicators out this week, for instance, showed that growth in Germany, long the region’s economic dynamo, had slowed nearly to a standstill.
Some analysts worry that the weaknesses in European bans, coupled with the economic slowdown, is creating a “toxic funding crisis” that could leave the financial firms strapped for cash and forced to curb lending.
Moreover, German officials and their voters appear to be bailout weary. As plans had recently leaked out for a unified European bond issuance, some German lawmakers and lobbyists have already protested that Germany would be unfairly hurt due to the inability to cut spending in countries such as Greece and Italy.
Germany has been seen from the eurozone as the local slush fund, however with years of withdrawals the time may soon come that European countries may no longer see extra cash from the German economic powerhouse.
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