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Kids aren't the only ones who get a report card before heading off for summer vacation. On June 15 the European Central Bank, headed by Jean-Claude Trichet, published its biannual Financial Stability Review—a report grading how the euro zone has dealt with the tumultuous past six months. The ECB's grade: a so-so B-.
Actually, that's not too bad, considering it's the first time the 16-nation zone has had to cope with a raging crisis. But the zone is hardly home free. The ECB predicts Europe's banks may have to write off $283 billion more by the end of next year. That's on top of the $366 billion they've already kissed goodbye, for a possible total of $649 billion.
The ECB doesn't mince words about ominous near-term risks, either. So how does the zone rate a B-? The central bank's praise falls into several categories. National guarantees for bank bonds "has been helpful for securing access to medium-term funding when needed." The ECB's own moves on May 7—including longer-term refinance options for banks and the purchase of euro-denominated bonds to increase market liquidity and free up capital—beefed up banks' funding options. And the ECB congratulated itself on cutting the zone's base interest rate to a record low of 1%.
See "Has Europe Done Enough to Stop the Financial Crisis?"