Europe 'must not rely on central banks'

23 December 2011

Europe is in danger of becoming overly-reliant on the assistance of central banks as the region's debt crisis rumbles on.

That is the opinion of Sir Mervyn King, governor of the Bank of England, who feels there is a real risk the financial issues on the continent could escalate further in the near future.

And, with this in mind, the official indicated it may be a good idea for financiers across the eurozone to stop placing so much emphasis on funding help from central banks.

On Wednesday (21 December), it emerged that 523 lenders across the continent had borrowed a total of €489.19 billion ($640 billion) from the European Central Bank in cheap three-year agreements earlier this week.

This represents a much larger figure than was expected and, speaking following a meeting of the European System Risk Board, Mr King noted this could be a dangerous trend.

"Dependence on central banks has risen and signs are intensifying that stressed financial conditions are passing through to the real economy," he stated.

By Asim Shah

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