Government guarantees on bank funding: Should we extend them into 2010 despite the improved bank profitability and the schemes’ distortionary effects?

In December 2009, government guarantees on the issuance of bank bonds will close to new issuance in many EU countries. This column argues that the guarantees have been effective and should be extended into 2010, despite improved market conditions and bank profitability. In doing so, governments should correct the schemes for some distortionary effects and develop a careful exit strategy.

Read the full article from A. Levy and F. Panetta on Vox.eu here.