Some countries, most prominently
Italy, might not have the fiscal policy space for such a recapitalisation of banks and might also face limits in direct support for the real sector. This is where a eurozone response is required. While the ESM has the option (so far not used) to directly recapitalise
banks, the total amount is limited to 60 billion euros. An alternative option, more adequate for a systemic crisis situation and suggested by several economists, is to establish a eurozone-wide bank restructuring agency (e.g., Beck and Trebesch, 2013). Such
a temporary agency could be in charge of restructuring viable and non-viable banks throughout the eurozone, funded by the ESM and possibly leveraged with private sector funding. Such an ad-hoc approach would also signal that these are special circumstances
and that the eurozone is not falling back into the bailout mode.