Second, instead of increasing the pressure for structural reforms and policy adjustments needed to strengthen competitiveness in the periphery, market forces acted in the opposite direction. The markets mis-priced credit risk, underpinning large capital flows into the periphery and reducing interest rate spreads.
The level of the policy rate was defined so as to achieve  BIS Review 103/2009  3  the primary objective of preserving price stability. At the same time, the Eurosystem engaged in active liquidity management in order to mitigate pressures in the money markets and their spill-over effects on financial markets and the real economy.