Fiscal policies While such schemes, as well as the government guarantees and recapitalisations, should assist in restoring a degree of normality to the functioning of the financial system, mitigating the fallout of the crisis on the real economy calls for a different set of policy tools, notably fiscal policy. In other words, if banks need some “additional oxygen”, so does the macroeconomy.
As always, the content and quality of the remedy, and the dose to be administered, are crucial.