If outside recommendations are perceived as being politically too costly, then we need to find solutions that promote national “ownership” of reform efforts. Monetary policy and sound economic policies must be complemented with sound financial sector policies to ensure sustainable growth. The recent crisis has shown that the quality of financial integration matters.
Risk sharing through the financial system can go into reverse, and banks can amplify and propagate rather than mitigate economic disturbances. This was a painful but well-learned lesson for the euro area. It is the reason that the banking union was established and the capital markets union was launched. Substantial progress has already been made.