Fiscal policy may also be subject to the same financial dominance: If bank undercapitalisation problems result into direct or indirect banking support programmes (through, for example, the establishment of bad banks), fiscal space is reduced; and the ability of fiscal policy to operate as a shock absorber declines, placing even greater pressure on monetary policy to operate as such.
Those who say that once the storm has passed, we should return to “business as usual” are grossly mistaken. That’s not the way we will achieve growth and create the jobs that are so necessary. Le Point: Would you, for example, be in favour of the creation of a European rating agency?