Is The European Financial Crisis  Ending ?

There are more and more signs that the plumbing of the European financial system is starting to work.

The latest, as FT reports, is that money market funds are once again buying European bank paper.

Last year, money market funds were sellers of many European banks’ short-term commercial paper as worries grew about the repercussions of a possible European sovereign default. That was a critical factor in market anxiety, as the highly rated funds’ $2.7tn in liquid assets are a key source of dollar funding.

Money market funds bought French bank paper with maturities as long as one month, as well as small amounts of Spanish bank paper, according to bankers. The funds also bought longer-dated UK, Dutch and Scandinavian bank paper, up to six-month maturities.

By the end of last year, the ECB was essentially the only game in town when it came to bank funding. While the ECB still basically backstops the whole thing, others are at least willing to enter the game again.