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Spain and Ireland, where demand is likely to be hardest hit by the housing and credit slowdown, have the advantage of running budget surpluses of around 2% of GDP.
On the empirical side, the impact of bank capital on loan growth has been a highly researched area in specific episodes of credit slowdown.
In particular, a number of papers explored the role of the introduction of new bank capital regulations (Basel I) in explaining the credit slowdown in the early 1990s in the US economy.
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There are still plenty of obstacles to overcome, especially as state and local governments struggle to sell bonds during the credit market slowdown.
When banks sustain large losses, like the savings and loan association crisis in the 1980s or the collapse of the Japanese bubble in the 1990s, the result is a contraction in credit, a slowdown in consumption and investment, and a recession.
Rae credited the slowdown in part to the healthcare system becoming more efficient, but also to high-deductible plans shifting a greater share of the spending burden to patients.
Given falling stock prices, higher oil prices and tightened credit, a significant slowdown in economic growth is a growing likelihood.
Construction and construction equipment executives here say they see hints of a modest weakening in the market, but little sign of a serious credit crunch or slowdown.
While no bank is expected to escape this summer's credit storm and slowdown in the housing market, Citigroup is expected to be particularly hard hit.
And as is the case with so many other real economy operations hampered by the credit crisis, a slowdown in trade wil feed back into financial institutions, potentially worsening credit conditions and feeding the downward spiral.
For that reason, Peter R. Orszag, the former Obama administration budget director and now a vice chairman at Citigroup, thinks that the Affordable Care Act should get only partial credit for the slowdown.
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CEO of Professional Science Editing for Scientists @ prosciediting.com