UK and Scandinavian banks are the most attractive in terms of country risk despite certain problems, investment firm Schroders argues in a note casting doubt about the recent European Union attempt to contain a debt crisis.

In a note issued shortly before Greece rattled global markets by announcing a referendum to approve a bailout package, Schroders credit analyst Robert Doig argues that any recovery in the price of eurozone debt will be capped until Italy, one of the most indebted eurozone nations, can deliver a clear growth plan.

In a note, called European banks: will the grand plan work? Doig writes that the €106 billion (around $146 billion) capital raising for European banks overstates the real amount of fresh capital that will be raised. Funds that have been earmarked for other projects need to be taken into account, as do retained earnings through to June 2012. On his estimate, the real amount of fresh recapitalisation required is around €25 billion, of which the majority is in Italy and Spain.

A continued problem, Doig said, is that Europe lacks a credible institution able and willing to stand behind the debts of the currency bloc. European governments, unlike 2009, no longer have unrestrained access to bond markets. “The one institution that might be seen as a credible EU-level guarantor – the European Investment Bank – has made it clear that it will not be providing the guarantees. As a result, Europe is an institution short of a solution once again,” he said.