On the back of a long period of economic growth, Germany is currently basking in very favourable public finances. However, burdens stemming from demographic change are looming on the horizon. Moreover, we cannot kid ourselves that the current period of economic prosperity will last forever. Now is precisely the time for fiscal policymakers to safeguard their capacity for effective intervention.
Indeed, the too-big-to-fail issue has emerged as an enormous problem, both for policymakers and for financial institutions generally. Creditors of a firm perceived as too big to fail have less incentive to monitor and restrict the firm's risktaking through adjustments to the price at which they lend money to the firm.