Lenders to European banks become increasingly cautious

European banks are facing higher interest rates for shorter-period loans because concerns about sovereign debt have caused investors and other lenders to reduce their risk taking. Meanwhile, money-market funds, which lend to major financial institutions, are having to rein in their lending because of new restrictions. The funding squeeze, should it go unchecked, threatens to evolve into a repeat of the 2008 credit crunch, according to The Wall Street Journal.

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