M. Messori: FINANCIAL INSTABILITY AND EVOLUTION IN THE EUROPEAN MONETARY UNION
From mid-2007 to mid-2013 the European Economic and Monetary Union (EMU) was characterized by financial and ‘real’ crises that had a significant impact on the evolution of European banks. In the post-crisis phase, these banks will be unable to keep their previous dominant position in lending to the ‘real’ economy and in managing the households’ financial portfolios. The present paper maintains that, as a consequence, the EMU’s financial markets will be characterized by two main problems: (i) the definition of a new division of labor among banks and non-banking financial intermediaries; (ii) the creation of alternative sources of financing that companies can turn to. To solve these two problems, it is necessary to fill the qualitative and quantitative gap between the desired allocation of wealth owners and the provision of finance to the ‘real’ economy. In the new financial model the construction of this bridge cannot be fully entrusted to banks; it requires co-operation between different financial intermediaries. This paper shows that the EMU’s banks have a short-term and a long-term interest in offering services to other financial intermediaries in order to facilitate the implementation of the new division of labor between them.