By A Thread 9/1/2011

I think the most plausible scenario is we see in particular the German Government refuse to participate in any more country bailouts, and just go, "You know what, from a German point of view, it's cheaper for us to bailout our banks' exposure to those countries that are will go broke rather than bailing out the country's themselves." Some banks seem increasingly reluctant to lend to others in the so-called interbank market. More to the point, there's a real risk now that Europe slips back into recession. Once you start to talk about a European recession, you can start to talk about the prospect of bank bad debts increasing again, asset prices falling again and of course public sector finances deteriorating again. -- Morgan Stanley 9/1/11