In sum, this is what, to me, largely explains the unsustainable developments in the run-up to the crisis. Hence, work is needed on three levels. First of all, the countries have to correct the macroeconomic imbalances and to boost the potential for sustainable growth by regaining competitiveness, by consolidating public finances, and by catching up on long-delayed structural reforms.
Second, we need to address the weaknesses in the monetary union’s institutional architecture. And third, we need a more resilient financial system. Owing to regulatory weaknesses, the financial system acted as an amplifying transmitter of the crisis. Due to time constraints, I would like to focus primarily on the first two issues.