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In addition to Europe’s sovereign-debt crisis is another looming problem: a private-debt crisis, built up by banks and private companies who took out huge loans, which they are unable to repay, writes The Economist.
Now, the European Central Bank is seeking to tackle the issue. Through its Asset-Quality Review, it will analyse the financial security of the region’s 128 biggest banks and make recommendations for recapitalisation for some and closure for others.
Noting that the Eurozone problem “has morphed from an acute crisis into a chronic one”, the weekly adds –
Sorting all this out will take time. Dealing with the private-debt trap should be a priority for Europe’s leaders. Better capitalised banks would be more able to lend; they would also make it easier to create a banking union.
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