The euro zone: Disintermediation of financing, an inevitable consequence of weaker banks

Euro- zone banks have a return on equity that is lower than the cost of capital, which inevitably means that they are becoming weaker: they cannot attract capital, which is invested in other business sectors, so they shrink. This places euro-zone banks in a position of weakness compared with banks in other regions (United States), and in the euro zone this imposes a substitution of disinterme diated financing in financial markets for bank financing, which is not necessarily a good idea .