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Purpose - This paper seeks to contribute to the study of the link between financial intermediation and economic growth in the context of the European Union and particularly in the context of the integration of new member-states. Design/methodology/approach - Panel fixed and dynamic Arellano-Bond estimates (with balanced panels) were used to explain and compare the influence of financial intermediation with the real per-capita GDP growth in two sub-sets of EU countries: the first one takes into account the availability of quarterly data and comprises 11 "old" EU countries, excluding Luxembourg, Denmark, Ireland and Sweden, for the period between Q2 1980 and Q4 1998; the second panel includes 24 EU countries (excluding only Luxembourg) for the period between Q2 1999 and Q4 2002. The existing empirical evidence was enhanced by introducing some financial variables to explain the real per-capita GDP growth, namely, the real domestic credit growth, the real foreign liabilities growth, the real growth of the sum of the bonds and money market instruments, in addition to two ratios: bank assets/bank liabilities and domestic credit/bank deposits. Findings - The results obtained confirm the importance of these variables to th~ real per-capita GDP growth and allow one to draw conclusions on some differences in the behaviour and the level of -integration of the two groups of EU countries. There is a relatively more homogeneous behaviour in the first panel, while the results for the second panel indicate that, in spite of the relative heterogeneity and the differences in their historical evolution, all the countries have had to adapt rapidly to the increasing competition and to the new EU market conditions. Originality/value - The paper confirms the influence of financial systems on output growth, as well as the efforts of financial institutions to adapt to the new conditions of the European and global markets in spite of all the differences in the historical evolution and initial conditions among EU member-states. [ABSTRACT FROM AUTHOR]

This paper reviews some of the recent studies on international capital flows with a focus on the role of European global banks. It presents a revision to the commonly held "global saving glut" view that East Asian economies (along with oil-rich nations) were the dominant suppliers of capital that fueled the asset price boom in many parts of the world in the early 2000s. It argues that the role of funding costs and a "liberal" regulatory regime that allowed for an unprecedented expansion of the balance sheets of European banks was no less important. Finally, we describe the aftermath of the crisis in terms of some of the challenges faced by Europe as a whole and European banks in particular. [ABSTRACT FROM AUTHOR]