The involvement of the private sector should limit moral hazard, strengthen market discipline and improve the repayment of loans. The fifth area of reform concentrates on the prevention of systemic instability. Most of the international best practices and codes have been established to minimise the effects that the insolvency of a financial institution may have on other institutions.
The idea is to manage and prevent crises more effectively. As with the European Stability Mechanism, the role of an “EMF”, or rather a European Stabilisation Fund, would be to lend money to governments under certain conditions. The key questions are: who will the decision-makers be? What role will the European Commission play? What will the governance structure look like?