The bank guarantee: a mistake we must fix
The markets see a rising risk of default. That is a more powerful argument for renegotiation, writes Colm McCarthy
Irish and European policies have been stuck behind the curve since the onset of the financial crisis in 2008. European banks remain under-capitalised and the stress tests in March come a full three years since the collapse of Bear Stearns signalled the onset of the international crisis.
Not one of the weaknesses in the design of the European Central Bank and the Eurosystem over which it presides has been addressed. The principal weaknesses exposed over these last few years are the absence of centralised bank supervision and resolution, and the reliance on uncoordinated national-level fiscal support when banks fail.
At the end of March, European leaders meet in Brussels to consider Franco-German proposals, the so-called Pact for Competitiveness, which address neither the current and continuing crisis nor the prevention of the next one.