ML-Implode News - BIS blames Europe's creditors for eternal euro crisis

The Switzerland-based watchdog said unprecedented imbalances have built up in the global system and these are failing to self-correct because the mechanism is jammed. The worst distortions are within Europe where monetary union drama is really a "balance-of-payments crisis" in disguise, caused by misaligned exchange rates. "The creation of a common currency removed the nominal exchange rate as an adjustment mechanism," said the report, "Caveat creditor".
The BIS said European banks played a huge role in stoking the pre-Lehman credit bubble. They rotated $1.25 trillion into US debt alone between 2003 and 2007, greater than the combined purchases of Asia and OPEC. It said banks funnelled money into southern Europe regardless of risk in "expectations of a bail-out" if any country got into trouble.

"European banks were negligent in assuming -- and their regulators in allowing -- such exposures. Overlending was as responsible for the ensuing crisis as over-borrowing."

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BIS blames Europe's creditors for eternal euro crisis