Bank recapitalisation versus firm support: A fiscal criterion for crisis policy by Markus Haavio, Antti Ripatti, Tuomas Takalo published by VOXEU (12/2025).
Governments routinely invest in private firms. This column argues that these investments have powerful effects on an economy’s crisis resilience, and that those effects depend crucially on whether the government injects capital into financial or nonfinancial firms. If the economy’s fiscal capacity is limited, recapitalising banks delivers more resilience per euro. If it allows large-scale risk absorption, direct firm support achieves similar stabilisation with fewer incentive distortions in banking.