Euro$ system circulates global money but now faces risks; European banks may restrict credit.

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TLDR:

  • European economy facing accelerated recession, worsening financial outlook
  • European banks rely on US-based subs for wholesale borrowing and re-lending to investment funds
  • Dollar funding now makes up 17% of European bank liabilities, up to a third for larger banks
  • Euro$ system circulates virtual ledger money globally, but now creates vulnerabilities
  • Economic downturn could impair European banks’ ability to access and extend credit globally
  • 2011-like scenarios could emerge, with European banks pulling back on global credit

Europe’s economic decline is now a global risk. As European banks rely heavily on US dollar funding, any significant setbacks in Europe can strangle liquidity worldwide, just like in 2011. With recession pressures mounting, European banks may reduce credit availability, which will reverberate across global markets, affecting everyone from Asia to the US. This highlights how interdependent the global economy is—and how fragile it can become when one key player falters.

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