Should we “get tough” with the banks? (department of secondary consequences)

The EU seems to have that in mind but here is the problem with that idea:

Distressed European Union banks that tap national governments or the region’s €440bn rescue fund for capital will be subject to state-aid penalties, involving compulsory restructuring or – in the worst case – orderly wind-downs…

The proviso – consistent with EU state-aid rules applied throughout the crisis – is likely to discourage banks from seeking public assistance and spur them to shrink their balance sheets instead, raising the danger of a credit crunch, bankers say.


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