PARIS — Europe’s banks are being squeezed from all sides.
They’re holding risky government debt. They’re struggling to get loans to operate. They’re paying higher rates when they do borrow. And regulators want them to build bigger cushions against bad loans.
The banks share the blame for Europe’s debt crisis. They enabled governments to pile up too much debt. But they also provide the grease that keeps an economy running. Without them, there can be no recovery.
A flurry of ominous news for Europe’s banks has fueled fears about the ability of some to survive the crisis. Many are also concerned that the banks will choke off money to the continent’s economy just as it’s struggling to eke out growth.
The credit ratings of five large European banks were downgraded this week. Speculation is rising that Commerzbank, Germany’s second-largest bank, might need to be nationalized. Others, such as UBS and Credit Agricole, are preparing waves of layoffs.
Last week, leaders from more than two dozen European nations crafted an accord that would force countries to submit their budgets for review and limit the deficits they could run. The goal is to prevent another debt crisis.
Yet since then, doubts have grown over whether that deal will be effective — or even enacted. European stocks have slid 2 percent. Borrowing costs for Italy and Spain remain at levels considered unsustainable.
The rising uncertainty about whether the crisis can be resolved is having a direct impact on the banks: They’re lending less to one another.
