Moreover, once in the euro, many nations became profligate as they gorged on cheap euro-denominated credit.
On current policy, euro-area credit is expected to fall by 1.7% by the end of 2013, producing a shallow recession this year and a return to growth in 2013.
Major indexes held on to slim gains until European Central Bank President Mario Draghi said Europe's economic outlook was subject to "high uncertainty" and that the central bank was trying "to do its best" to avoid a euro-zone credit crunch.
France's market regulator last year demanded that companies value their assets more realistically - prompting a 7.4bn-euro charge from Credit Agricole.
Since last July, banks have had to charge consumers the same amount for euro-denominated transactions on credit and debit cards whether the transaction was made in their home country or another EU country.
German Chancellor Angela Merkel again criticizing calls for the issuance of euro-bonds and a credit rating downgrade for Portugal by Fitch Ratings damaged sentiment, while Hungary was also issued with a debt-rating cut late Thursday.
The group on the euro-denominated issue includes Barclays, Credit Agricole, Mizuho, and Nomura.
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With a few exceptions, the benchmark cost of credit in each euro-zone country is related to the balance of its international debts.
Bond investors have become choosier about sovereign credit risk, so some euro-area borrowers have had to stump up higher coupons for their recent bond issues.
Hovering near 11-month lows, the euro strengthened only slightly against the dollar as investors feared that credit downgrades were looming for members of the 17-nation currency bloc.
Dexia, which used short-term funding to finance long-term lending, found credit drying up as the euro zone debt crisis worsened.
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Mr Trichet believes that focus makes sense, as euro-zone businesses and homebuyers rely more on banks than capital markets for credit.
Participants were reacting to the loss of high-quality Libyan crude and its subsequent faster-than-expected resumption, Middle East unrest, the U.S. credit-rating downgrade over the summer, and the ongoing euro-zone sovereign-debt crisis.
Moody's cut its forecast for the U.K. economy, saying Britain's economic and fiscal outlook have weakened due to the euro-zone crisis, though it kept its negative outlook and triple-A credit rating on the country.
Given better-than-anticipated progress on strengthening the euro zone's rescue fund and governance, credit would shrink by just 0.6% in 2012 and the euro area could grow this year.
Alternatively, if recent fiscal agreements unravel, credit could tumble by 4% or more, touching off a deeper euro-zone recession.
France could be stripped of its triple-A credit rating before Christmas, raising new doubts about the survival of the euro, analysts have predicted.
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The super bears believe in a euro-crack up, the U.S. going to single A or even triple B credit rating, and maybe even defaulting.
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The drop in euro-zone inflation will be largely caused by disinflation in the peripheral economies, where fiscal austerity and a credit crunch will squeeze wages and prices.
The ECB's wake-up call is likely to come when its statistics department discovers that credit growth in the euro area has contracted for the first time since the formation of the European Monetary Union, says Cailloux.
As Europe stumbles into recession our multinational corporations must feel the heat from a declining euro and lessening revenues, particularly sectors like technology, consumer durables and non-durables and financial services like credit cards receivables, travel and entertainment.
Worse-than-expected growth in the U.S. and euro zone or disorderly adjustments in the Chinese housing and credit markets remain the two biggest downside risks to a benign soft-landing at this point.
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