It appears that Europe is about to repeat the same mistake in Greece that it made in October, when it mandated additional sovereign debt buffers for its banks. Only this time round the mistake may have truly catastrophic consequences.

At that time Poland (which then occupied the European Union presidency) together with Italy and Spain, insisted that the creation of an effective firewall against the eurozone sovereign debt crisis spreading from country to country, must precede the imposition of capital buffers.

Solemn undertakings to this effect were made by all. The capital buffers were to come into effect only after the firewall was in place. In fact, nothing of the kind happened. Europe was only saved from massive deleveraging in the banking system, and an ensuing depression thanks to the European Central Bank flooding European banks with liquidity through its longer term refinancing operations – action that would not have been necessary had the firewall already been in place.