Moreover, the Covid pandemic has once again highlighted the unfinished agenda of increasing the growth potential across Europe, completing the European banking union and the need to break the interconnectedness between governments, the domestic banking sector and nonfinancial corporates. Additional measures are needed to develop the European Capital Markets Union and facilitate private risk-sharing.
Importantly, stable financial markets and institutions allow changes in the stance of policy to transmit in a smooth and expected way to the financial conditions that households and businesses face in making spending and production decisions. Instability in the financial system, on the other hand, hinders economic activities of households and businesses, which impedes the attainment of our dual mandate.