The EU-wide bank stress test results released on July 15 offered little reprieve for financial markets as concerns over the eurozone sovereign debt crisis continue to dominate. At the heart of the stress test scenario is the ‘adverse scenario’, in which the euro-area economy contracts 0.5% in 2011 and equity markets fall 15%, while banks have to write off 25% of debt on Greece’s 10-year bond. Importantly, while considered to be substantially more rigorous than the body’s stress test last year, the stress test does not take into account the possibility of a sovereign credit event in the eurozone, a scenario we at Business Monitor have long been arguing is only a matter of time. Mark Schaltuper, Head of Europe Analysis, is joined by fellow Europe analysts Chris Graham and Bruce Jeffery to discuss their views of the stress test results.
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