As the case of Ireland well illustrates, problems in the financial system require the intervention of the public sector, jeopardising the sustainability of public debt. Conversely, unsustainable public indebtedness affects the banking system’s financing capacity, jeopardising financial stability. An environment of financial stability reduces uncertainty, protects investors, contributes to lower, less volatile interest rates and ensures stable financing flows to the economy.
They distort competition, generate trade reallocations not based on economic fundamentals and cause social discontent. It was evident that the Exchange Rate Mechanism of the European Monetary System was not compatible with the degree of openness of the economies participating in the single 1/5  BIS central bankers' speeches  market and the existence of autonomous monetary policies.