From Peter Tchir of TF Market Advisors
I can't take credit for finding this graph of Eur Basis Swap [the cross currency basis swap between 3M EURIBOR and 3M LIBOR], but it seems to be a decent indicator of European banks having difficulty funding their USD business. Maybe I'm reading more into the chart than there is, but that is what I see going on.
It makes sense with all the other data that is out there and the anecdotal evidence that US banks are pulling back their lending to European banks.
Germany just announced they are preparing to prepare for a Greek default (my take on Merkel's statement). I have been arguing for a long time that they have to let Greece default and then try and pick up the pieces in a less complex and less intertwined world.
ZH addendum: we note that the CP markets (non-financials) is not showing quite as much stress with 7-day EUR Euro commercial paper rates remaining well above USD Euro commercial paper rates but not systemically drying up yet - if we see this start to crack then the transmission channels will have well and truly started contagiously shrieking - though we do note that the absolute levels of these two rates has jumped considerably recently as general liquidity dries up over there.