These developments raise important questions. Is the euro area economy hitting its capacity constraints? Or is there still economic slack that is holding headline inflation down? How will wage inflation pass through to price inflation? How to measure economic slack There are signs of a tight labour market.
A prototype for such a framework already exists – namely, the rules set forth in the Federal Deposit Insurance Corporation Improvement Act of 1991 for dealing with a failing bank. As the FDIC is now able to do with a failing bank, the government should, under appropriate circumstances and with appropriate safeguards, be able to seize and wind down a failing, systemically critical firm.