Exchequer data indicate a sizeable decline in tax revenue in the first half of 2008, primarily reflecting a marked slowdown in property related taxes, but also indicative of a slowdown in consumer spending. On the expenditure side, the weakening of the labour market is increasing social expenditure. This points to significant deterioration in the fiscal deficit for 2008 relative to earlier projections.
Third, the regulatory treatment of securitisation should be revised to better reflect the risk-mitigating features of high quality securitisation and to address current inconsistencies in the legislation. More generally – going beyond the notion of banking union, we should work towards creating an integrated financial market union that supports the real economy.