The economic policy debate over recent years has been preoccupied with the “European troubles” – as the conference title indicates. It is certainly encouraging that the focus of this debate is starting to shift from: “How much worse does it get?” to “Is it finally getting better?”. There are signs of convalescence and “re-integration” in European financial markets.
More than 60 years ago, he came up with a short and snappy solution to the problem: “Whoever reaps the benefits must also bear the liability.” Incentives are appropriate only where the banks’ shareholders and creditors are liable. And only where the banks’ shareholders and creditors are liable will taxpayers not be asked to foot the bill.