Nonetheless, further regulatory measures are required to loosen the “doom loop” between sovereigns and banks. In future, banks should have to provide capital backing for loans to governments. And there should be ceilings for lending to governments, as there are for loans to the private sector.
We are also saying: where there are still fiscal targets to meet, countries continue to need to be prudent and to maintain their structural targets. Now of course, structural targets allow automatic stabilisers to work around those. So we think this message should be fairly straightforward to understand, this basic statement.