The degree of financial integration in the euro area is such that if some sovereigns are pushed into a bad equilibrium this affects other countries. The banking system can become fragile. What starts as a liquidity problem can easily turn into a solvency problem.
The role of EU funds Third, let me turn to the role of EU funds. As an immediate response, EU authorities provided emergency support financing and eased certain requirements, such as national co-financing requirements, to tap available cohesion and structural funds from this year’s EU budget. In parallel, flexibility clauses in the fiscal framework were activated and state aid rules temporarily adjusted.