Elements of a crisis response Against that background, dealing with the crisis required two types of policy response. The first was a determined stabilisation policy to offset the effects of the boom-and-bust cycle on demand. The second was a policy of structural reform, to bring about the necessary institutional changes that the early years of EMU had failed to elicit.
Stabilisation can in principle be provided either by monetary policy or fiscal policy. With fiscal policies at best unavailable, however, the burden had to be borne principally by the central bank. That task was further complicated by the fragmentation of the banking sector, which severely disrupted the transmission of our monetary policy across the euro area.