Blog post from London School of Economics & Political Science
Abstract
The banking crisis in Europe has three distinct legs according to Lorenzo Codogno and Mara Monti. The first leg was purely financial contagion from the sub-prime crisis in the US to toxic assets held in bank portfolios in Europe, while the second wave was equally intense, amid the negative feedback loop between banks and sovereigns. The third wave is the lagged impact of the economic crisis on the quality of loan portfolios: it has just triggered intervention by the Italian government, but it may require additional public money across the EU. Public money injected today is just a fraction of what was injected at the outset of the crisis. However, more than nine years since the sub-prime crisis started, it is striking that the EU is still facing banking problems