Europe’s banks need a fundamental restructuring to sort out the mess from the 2008 financial crisis and enable them to fund the growth that the eurozone and British economies so desperately need, a former senior aide to European Commission president José Manuel Barroso has claimed.
Philippe Legrain, who in February ended a three-year stint as Mr Barroso’s independent economic adviser, believes that a banking shake-up is essential as the first part of a three-pronged strategy to get Europe back on track.
“Europe needs to restructure its banking system,” he said in an interview with The Telegraph. “The Americans have been much more vigorous in that than we have.
“There has been a belief that it’s best to try to preserve existing banks and exercise regulatory forbearance rather than force them to face up to their losses, sorting viable banks from unviable ones, recapitalising viable ones and closing down the unviable – the usual standard policy for dealing with a banking crisis.
“The rule book has been broken here in Europe and the result is that we have a zombie banking system that keeps alive zombie companies that should go bust, while failing to extend credit to promising new companies that could deliver future growth.