A European Lender of Last Resort? Some Lessons from History

Politicians, bankers and economists have at various times and again in recent years started to urge that there be created an ‘international lender of last resort’. Depending on the context, the ‘international’ role is thought to cover either the European Union, or, in some particularly ambitious proposals, the world as a whole, with the IMF sometimes suggested as taking on the role of worldwide lender of last resort (LLR). In every case, the objective is to ensure the stability of national banking systems — either within the EU or worldwide. The purpose of this chapter is to consider the international LLR proposal from three aspects — analytical, historical and, to some extent, that of the history of economic thought; the primary focus is on theory and history. The chapter is in four main sections.