Instead, they spent the cheap money on public or private consumption – as in Greece and Portugal – or they allowed their residential construction sectors to boom, which eventually led to oversized and vulnerable banking sectors – as in Ireland and Spain.
Sharp reversals of credit booms or persistent losses in competitiveness can very easily put the solvency of governments at risk – which is exactly what happened. BIS central bankers’ speeches  1  And this is of particular relevance in a monetary union, since member states are no longer capable to offset losses in competitiveness by devaluing their exchange rates.