Europe's Debt Crisis Just Got Worse

Liquidity is drying up as British banks become cautious about the the finances of European banks exposed to the eurozone debt crisis.

UK Banks Abandon Eurozone Over Greek Default Fears -- The Telegraph

UK banks have pulled billions of pounds of funding from the eurozone as fears grow about the impact of a “Lehman-style” event connected to a Greek default.

Senior sources have revealed that leading banks, including Barclays and Standard Chartered, have radically reduced the amount of unsecured lending they are prepared to make available to eurozone banks, raising the prospect of a new credit crunch for the European banking system.

Standard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks.

Read more ....

Update: Moody's threat to downgrade Italian debt raises eurozone contagion fears -- The Telegraph

My Comment: This crisis is going to get worse for the simple reason that you cannot change a culture like Greece (or Italy) that has become addicted to debt and heavy borrowing from countries who practice greater discipline. The British banks are beginning to realize that .... and are bailing out as quickly as they can.