Not only cross-border financing for investments dried up, but lending to the domestic real economy broke down. Without fully developed cross-border capital markets, and with fiscal policy unable to provide full insurance, the euro area was left without risk-sharing arrangements. The free flow of capital should not be restrained beforehand, even though it does permit the fast unravelling in times of crisis.
After all, free capital flow is a pre-condition for financial integration. Instead, the conclusion is rather to promote initiatives that enhance risk-sharing across member states, such as the Banking Union and the Capital Markets Union, and at the same time improve the overall regulatory and policy framework to reduce the incidence of crises.