Rise of zombie banks threatens Europe's credit investors

European governments have yet to address the problem of zombie banks: those institutions leveraged to the hilt, unable to lend, and a persistent burden on the state. But with banks facing massive refinancing requirements and growing scrutiny from investors, if governments don’t act now the continent could soon face a new banking crisis.

Zombie banks: threat to Europe's bondholders

In June 2010, Uri Dadush, director of the international economics programme at the Carnegie Endowment for International Peace in New York, co-wrote an article warning that Europe’s banking sector remained in dire straits and needed urgent action.

In Europe’s Second Banking Crisis? Dadush argued that, despite the creation of the European Financial Stability Facility by the European Union and International Monetary Fund in May 2010, Europe’s weak banks would choke credit growth and economic

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