All this created a vicious circle of debt and interest payments, pushing Turkey into an ever more difficult financial position. The deterioration of the public financial balance, the rise in domestic debt due to continued high real interest rates, the acceleration of inflation rates and the continuing economic contraction made it necessary to embark on a medium-term economic austerity programme.
The role of the ECB in macroprudential policy is to enhance national policies and reduce the inaction bias inherent in taking potentially unpopular and intrusive national actions. The European Systemic Risk Board (ESRB), in turn, monitors the development of EU-wide cross-border and cross-sectional systemic risks and provides guidance and recommendations to the national authorities.