The Dangers of the Shift to a Disintermediated Model of Corporate Financing in the Euro Zone

Eurozone corporates already finance more on the capital markets and less through bank lending. This evolution is due to the new regulations of European banks, but also corresponds to a theoretical view according to which financing on the capital markets in more efficient. We believe that the switch of Eurozone corporates to financing on the capital markets is a mistake for two reason: the weakness of the demand of risky assets by individual investors; the requirement, with this type of financing, of a larger flexibility of the labor market.