Let us briefly take stock of some of the policy decisions and proposals in the European Union. Faced with an economic contraction of at least
3 per cent this year, according to my estimate, the EU has agreed an effective stimulus of some 0.85 per cent of gross domestic product for the current year, as calculated by David Saha and Jakob von Weizs?cker, two economists at Bruegel, a Brussels- based think-tank. The stimulus was also not well co-ordinated, which limits its economic impact.

EU governments reacted to the acute phase of the crisis with mostly voluntary state recapitalisation schemes and debt guarantees. But there is not a single country where the schemes seem to be solving the problem of insufficiently capitalised banks, able and willing to lend to businesses and consumers.

Last week's much awaited report about the future of European banking regulation and supervision was another example of a policy proposal failing to meet even the lowest expectations. The committee, headed by Jacques de Larosière, a former governor of the Bank of France and managing director of the International Monetary Fund, could not agree on the need for a single supervisor for Europe's 45 cross-border banks. Instead, it recommended leaving national regulators in charge and creating two new institutions – one at the macro level and one at the micro level – with the job of mediating between national governments and regulators. When asked why he did not opt for an EU-wide supervisor, Mr de Larosière responded: “We might have been accused of being unrealistic.” I got the sense – but maybe this is a misperception – that he wanted to push harder for more centralisation, but that there was no consensus.