It is also critical to meet the fiscal consolidation targets and successfully restructure the state-owned enterprises sector to avoid crowding-out credit to the productive sector. Of course, it is not all good news. As expected, the unfavourable economic and financial environment has taken a toll on banks’ profitability.
In the long run, a monetary union is only politically stable if the countries that are liable for certain risks, also have the means to control and mitigate these risks. The original EMU setup was thought to strike the right balance in this respect. Policy coordination was relatively mild, with the European fiscal rules as the most binding element.