Varieties of banking aid measures
Financial markets OeNB Vienna, Austria
International Affairs OeNB Vienna, Austria
European states have reacted to the recent financial turmoil by preparing rescue packages for the banking sector. While there is a degree of harmonisation in terms of minimum requirements (instruments and durations allowed, pricing etc.), there is also a considerable amount of differences between countries concerning size and features of the packages. EU governments publicly frame the packages as necessary not only to stabilise banks but also to stabilise the broader economy and the labour market. We argue that they (can) entail considerable redistributional effects. These crucially depend on the technical details of the packages, such as pricing of capital injections and guarantees as well as conditions attached to the various measures. In our paper, we first distil the differences in these details and analyse their distributional impact. Second, we study the politico-economic determinants of these differences by looking at possible links between rescue packages and indicators derived from the "Varieties of Capitalism" literature and comparative welfare state analysis. We utilise a comprehensive data set of the details of rescue packages of 25 countries in the EU plus the USA.