Ewald Nowotny: CESEE outlook - reconciling fiscal consolidation and growth Opening remarks by Prof Dr Ewald Nowotny, Governor of the Central Bank of the Republic of Austria, at the Seminar on the IMF’s Regional Economic Issues Report “CESEE Outlook: Reconciling Fiscal Consolidation and Growth”, Vienna, 13 November 2015.
A permanent provision of such free put-like options obviously distorts the market mechanism and prompts undesirable risk taking or “moral hazard.” To put it differently, free shelters should be provided against a hurricane, but there should be no free umbrella against plain old rain. Second, central banks’ ability of providing “catastrophe insurance” is not unlimited and depends crucially on market participants’ confidence in them.