It is not unreasonable to expect that a bailout of one country may generate the speculation of a bailout of another country, provoking financial contagion. BIS central bankers’ speeches  1  In the context of the limited resources available and the tensions stemming from the distribution of funding costs for ever larger rescue plans, bailouts could become self-defeating.
One possibility for limiting moral hazard is to incorporate in all programs some degree of debt restructuring, which in turn may affect banks’ balance sheets. The implementation of such initiatives is itself very challenging, particularly when official institutions become significant holders of problematic debt.