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Brussels blog by some wire service journalists

EU divided over measures to avoid credit crunch

By GABRIELE STEINHAUSER

BRUSSELS (AP) — The European Union is still divided over how to get banks within the 27-country bloc to keep lending to each other as they struggle to avoid a credit crunch that could further hurt economic recovery.

Finance ministers at their meeting in Brussels Tuesday discussed different schemes to guarantee lending between banks, but failed to agree on a common approach amid disagreement over whether states should share the risk of the guarantees.

Lending between banks has slowed markedly on recent weeks amid concerns about the weakness of lenders and how they could be hit by Greece defaulting on its debts and further declines in the bond prices of Italy and other wobbly countries.

Many banks have had to turn to the European Central Bank for extra liquidity, but the slowdown in lending threatens to also hit credit to businesses and individuals.

READ FULL STORY HERE.

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