The need for a continuous rise in productivity performance has long been recognised in Europe; it was the context for the launch in 2000 of the Lisbon Agenda, which aimed to make Europe “the most competitive and dynamic knowledge-based economy in the world” by 2010. As we know, most of its targets were not reached.
In short, the financial industry in the years preceding the crisis had been transformed into one that was highly vulnerable to runs on the short-term, uninsured cash equivalents that fed the new system’s reliance on wholesale funding. The relationship between large firms and shadow banking meant that strains on wholesale funding markets could both reflect and magnify the too-big-to-fail problem.