What if Europe’s problem isn’t a lack of liquidity?

by Ferdinando Giugliano for The Financial Times

Since the onset of the global financial crisis, the European Central Bank has been desperate to funnel cash into the eurozone’s financial system, in the hope this would boost investment and growth.

Yet, despite steep cuts to interest rates and several rounds of cheap loans to banks, the eurozone is still struggling to get enough investment projects off the ground. Last week, the ECB launched an ambitious programme of quantitative easing aimed at prompting banks to lend more by lowering the interest they receive on government bonds.

But what if Europe’s investment problem was not the result of a shortage of liquidity?

A new study by the Centre for Economic Policy Research, a research network, and Assonime, the Italian association of joint-stock companies, argues that Europe’s investment gap may actually be the consequence of widespread flaws in the governance of European companies and banks, rather than simply the result of insufficient financing. Read more here.


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