Nowadays, such a narrow focus seems less fitting for two reasons: First, implicit guarantees for, and explicit bail-outs of, banks have become an omnipresent phenomenon since 2008 for those parts of the sector generally viewed as “too big to fail” or “too interconnected to fail”. Second, Europe’s banks have substantially increased their investments in sovereign bonds.
The fundamental fiscal issue is the need to make difficult choices among budget priorities, and this need is becoming ever more pressing in light of the unprecedented number of individuals approaching retirement age.