When confidence goes, so does capital - IMF warns Eurozone on capital flight

The IMF has warned that unless the Eurozone resolves its capital crisis, European banks' balance sheets will contract severely, further damaging growth and pushing unemployment beyond already record highs in the region.

In its global financial stability report, the IMF concluded that capital flight from the Eurozone's periphery to the bloc's core, driven by fears of a break-up of the currency union, had sparked "extreme fragmentation" of the euro area's funding markets. The fund said this was causing renewed pressure for banks to shrink their balance sheets, particularly those in countries with fiscal woes ... READ MORE

Released by the Financial Times - 9 October 2012