Recent developments do not bode well for the return of capital mobility between the euro-zone countries

Capital mobility between the euro-zone countries is vital: it makes it possible to finance efficient investments and to diversify portfolios and spread risk across countries. But for capital mobility between the euro-zone countries to return (for Germany and the Netherlands to be willing to lend their excess savings to the other euro-zone countries again): Confidence must be restored in the solvency of borrowers ( governments , banks, etc.); Investing (or lending) in the euro zone must be at least as attractive as investing (or lending) in the rest of the world. From these two viewpoints, recent developments do not bode well: The Italian crisis casts doubt over the ability of the euro-zone countries to ensure their fiscal solvency and has led to bond capital outflows from Italy and from the euro zone as a whole; The sharp fall in share prices, the fall in growth and the fact that interest rates are set to remain very low are reasons to invest in the rest of the world. German and Dutch savers therefore have little incentive at present to start lending again to the other euro-zone countries.