Following the theme of a pullback in bank credit, a survey released by the European Central Bank shows a significant decrease in Q2 2011 wholesale funding and continued decreased expectations for Q3 2011. This continued difficulty in issuing both short and long-term debt will put ongoing strain on Europe’s financial condition.
Source: Euro Area Bank Lending Survey, European Central Bank, July 2011
This is a self-reinforcing loop. It may take a strong external stimulus to get things moving in the right direction again (in this case, more negative numbers on the chart above).