We review the events that led to the May 2010 and July 2011 bailout agreements. We interpret the bailouts as outcomes of political-economy equilibria. We argue that the second bailout was not on the Pareto frontier and sketch political-economy arguments for why this may be so.

What institutions and policies are needed to sustain UK economic growth in the dynamic world economy of the twentyfirst century? After years of inadequate investment in skills, infrastructure and innovation, there are longstanding structural weaknesses in the economy, all rooted in a failure to...