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International institutions should avoid moral hazards

Comments on Wolfgang Münchau “A G20 comedy of irrelevance”, 7/11/2011, http://www.businessspectator.com.au/bs.nsf/Article/G20-summit-eurozone-debt-crisis-Italy-bonds-ECB-EF-pd20111107-NCR2E?OpenDocument&src=mp

No matter what new world and regional institutions are set up, a key principle should be to avoid moral hazard problems.

People or countries with irresponsibility or mistakes must pay a price.

The IMF or ECB cannot be simply bail out countries without those countries required to pay a reasonable price for that bail out.

On the other hand, whoever contribute to bail out should be explicitly rewarded.

Without this kind of quasi market mechanism being introduced and effectively implemented, future failures cannot be minimised.

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