Two years after the fall of Lehman Brothers, and a massive bank bailout agreed by European governments, the eurozone’s financial sector is still fragile. As we have seen in recent weeks, the Irish banking sector is insolvent, and there are questions about the capacity of the Irish state to absorb those losses. Jürgen Stark, in charge of the monetary policy section of the European Central Bank, last week raised questions about the solvency of the German banking sector. Wherever you look, two years have passed and nothing has been resolved. There has been lots of activity – bailouts, bad banks – but no resolution. It was always clear that this wait-and-see approach would eventually backfire. It may be happening already.
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