From as far away as the United States of America we know the recent financial sector crisis originated from the sub-prime mortgage sector of the banking system. The impact has been felt around the globe and has left, in its wake, major financial institutions on their knees. The developments have affected hitherto remotely related economies and have left lessons for policy makers and bankers.
The Capital Markets Union will enhance cross-border investment and consequently strengthen private sector risk-sharing across countries, as returns on assets and access to credit become less correlated with domestic economic conditions in each Member State. Besides enhancing the channels of private risk-sharing, a fiscal stabilization tool to cushion large macroeconomic shocks i.e., public risk-sharing, is warranted in the euro area as a whole.