Governments then often have no option but to bail out these banks to prevent the system from collapsing. This costs a lot of money. Look at Ireland, for example: rescuing its banks raised the country’s 2010 budget deficit to more than 30% of GDP.
The market for tradable bonds will dwindle even more rapidly once the switch (commendable in and of itself) from a pay-as-you-go pension system to a pay-as-you earn one gains momentum, and especially once the proposal to introduce an obligatory pension scheme in the present institutional structure is accepted.