This literature has long called for a strengthening of fiscal rules, but also for euro-area wide bank supervisory bodies in order to bypass dangerous incentives at the national level to tolerate imbalances in the domestic banking sector, with associated risks of contagion and systemic crises (Uhlig, 2002). Indeed, the current dire situation is the result of the lack of effective and enforceable rules, i.e.
We have seen an improvement almost everywhere, including Portugal, which will also benefit from the reforms undertaken, the fall in the oil price and better financial conditions. The question mark hangs over what we call “reform fatigue”, whereby, for example, some reforms have been suspended in recent months. There is a risk that Novo Banco will be sold below the value of the recapitalisation.