London, United Kingdom (PressExposure) June 29, 2010 -- “Sovereign-International”, is warning clients of the risk of the new credit crunch that could engulf not just Europe, but the entire global banking system.

The firm’s strategists said that the recent European Financial Stability Facility was showing signs of being somewhat half-hearted in its approach to buying the sovereign debt of debt stricken countries including Greece and Spain.

The facility, unveiled in April, pledged over €900 billion in funding to rekindle investor confidence in the euro but recent evidence suggesting that French banks have been dumping their Greek bonds on the ECB have annoyed their German counterparts who were the most resistant of the EU member states to the notion of bailouts or quantitative easing.

One “Sovereign-International” analyst said that if other banks followed the French banks’ example, the ECB could be forced to ramp up its purchases of debt in addition to providing liquidity to banks who have been frozen out of the international credit markets for short-term funding.

The rate at which banks lend to each other in the EU bloc has risen markedly leading “Sovereign-International” to suggest that many of them may begin restricting lending to businesses and individuals at a time when the euro zone needs to stave off a double-dip recession.

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