Firewall needed as eurozone stands on brink of meltdown

Unless Europe’s policymakers seize the initiative to secure the position of Spain and Italy, we could see a new seizure in bank funding markets which would force the euro area either to underpin monetary union with some mutual fiscal guarantees or to fragment.

In the first half of 2008, the banking industry seemed to be recovering from the initial sub-prime shock. Capital was raised and interbank spreads narrowed. Liquidity support and the rescues of Bear Stearns and European banks demonstrated the authorities’ determination to stabilise markets if necessary with public funds.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8182445/Firewall-needed-as-eurozone-stands-on-brink-of-meltdown.html