As a result, we currently face the challenge of improving regional economic competitiveness. To confront this challenge we must not neglect the escalating political-economic relevance of the ever emerging local governments, which tend to be highly location specific. This provides insight that the uniform engineering of economic and social growth on a national scale is irrelevant at the local level.
Both fiscal and macroprudential policy need to be strongly countercyclical: this entails building up "buffers" during good times 3 for use in bad times. 4 While sovereign debt must be sustainable to be used countercyclically, macroprudential capital buffers need to first be built up so that they can be released when risks materialise.