At the same time, the euro area countries trade freely with each other and we conclude from this that free trade and compensation are not mutually exclusive. Let me be clear that assistance in the form of benefits is not the only and certainly not the most effective way to help people.
As such, they may be just an implicit part of the dynamics of the business cycle. But neither are demonstrably in the best interests of the economy or the bank’s shareholders. They lead to an unnecessary degree of volatility in earnings and, as such, to a reduced long-term capitalized value of the bank. This, in turn, lessens the effectiveness of financial intermediation.