Rescue remedy

After navel gazing for much of the financial crisis, European governments got their act together in October with a series of measures to shore up banks' tier 1 capital and provide guarantees for funding and deposits. Indeed, the UK government's model of direct capital injections in banks where necessary was so warmly received that it was rapidly emulated in the US and elsewhere in the world.

The reaction in credit markets was euphoric: the iTraxx financials index tightened by more than 50bp to 96

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