Robert Peston
speaker
59 appearances
2 recordings
1 series
first heard Dec 2012
last heard Jan 2015
Robert Peston’s voice in public audio — every appearance, attributed to the second.
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Appearances
My statistic of the year was given to me by Jean-Claude Trichet.
He's the former president of the European Central Bank.
And he told me about the 80-20 ratio for Europe and the 20-80 ratio for the United States.
In Europe, roughly speaking, banks provide 80% of the finance needed by businesses and households, whereas in the States, banks provide only 80%.
20% of the finance required by businesses and households.
Why does this matter?
Well, it tells us a huge amount about the crisis in the Eurozone, and it also tells us a huge amount about why the economy of Britain and many of the economies of Europe in general have singularly failed to recover since the great crash of 2008.
Whereas although the American economy isn't off to the races, it has grown rather more strongly than the European economies.
So let's explain the significance of being so dependent on banks.
When banks are weak, when they have a shortage of capital, which is palpably true of many Eurozone banks and arguably, according to the governor of the Bank of England, true of British banks.
they are reluctant to lend.
What they try and do is they actually try and shrink.
They try, to use a ghastly phrase, deleverage.
And when banks deleverage, when money is not going to households and businesses, frankly, our households and businesses can't spend, they can't invest, and the economy can't grow.
And also...
When you have banks playing such an important role, it also turns out banks are enormous.
They're so big that when they get into trouble, even governments like the Spanish government find it very difficult to afford to bail them out.
So the 80-20 ratio tells you two fantastically important things.
It tells you why the European economy has been so sluggish, and it also tells you why governments like Spain and Ireland have been on the brink of bankruptcy because their banks are so big they can't afford to rescue them.
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