A few years later, the reverse happened. Despite the multitude of possible causes, only 40% to 60% of the damping effect can be explained. The latter two factors - less activist budgetary policies and fewer global shocks - each account for 20% to 30% of cyclical damping since the early 1980s.
In addition, the cross-border effects of bank turmoil also mean that we need a harmonised approach to bank restructuring and resolution. To achieve both of these goals, Europe is in the process of setting up a banking union which will initially be based on two pillars: •  the Single Supervisory Mechanism, or SSM, based at the European Central Bank (ECB).