The Euro-Zone: Slow Growth, High Debt and Pressures on Banks and Official Financial Institutions

Policy Brief Number 1
September 2011

The Euro-Zone: Slow Growth, High Debt and Pressures on Banks and Official Financial Institutions

Author: James A. Hanson

In September 2011, the risk of continued slow growth and even a double dip recession was high in the Euro-zone. The slow growth reflected the continued austerity programs to ease sovereign debt problems; the lack of fundamental structural reforms in these programs; and the market’s recognition of these half-hearted attempts. Meanwhile, banks remained weak in many cases, as reflected in equity markets and noted by the IMF. These developments meant that the European Central Bank and the national central banks would face pressures to provide support to weak banks and buy sovereign debt through 2012. This policy brief examines these pressures and the challenges both to the ECB and the Euro-zone itself.