With such strong forces for macroeconomic stability, what need for anyone to pay attention to fiscal and cost competitiveness? But markets were not as effective task-masters, and they allowed the old pattern of imbalances to persist.
Indeed, the very fluidity of large-scale international capital flows (partly attributable to the currency union itself, but even more – as can be seen by the parallel experiences of countries such as Iceland and Latvia – by technology-driven liberalization of finance) allowed the imbalances to become larger than ever.