World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
The Liquidity Consequences of the Euro Area Sovereign Debt Crisis
William A. Allen & Richhild Moessner
World Economics, March 2013

We examine the liquidity effects of the euro area sovereign debt crisis on euro area banks as a group, on intra-euro area financial flows and on international liquidity. The lending capacity of the euro area banking system has been much weakened, despite the remarkable growth of the operations of the Eurosystem, including its greatly increased lending and its intermediation between national central banks in surplus and deficit countries. The euro crisis has also created international liquidity stresses.


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