(Perhaps, despite Treaty prohibitions, market participants assumed that any sovereign that got into trouble would be bailed-out). Indeed, sovereign spreads in the euro area were almost totally insensitive to credit ratings before the crisis (Figure 2). One often-heard interpretation of what happened during that decade is that the complacent market environment relaxed the budget constraint on euro-area sovereigns and led them to borrow recklessly.
For instance, consideration is being given to taxation of the financial sector, on institutions and on transactions, as a supplement to regulation of the financial sector in the interest of stability, and possibly growth and equity. Further, policies relating to management of public debt have a bearing on the functioning of  5  the financial sector.