Above all, there was a danger that the financial sector might become impaired and that this could make the severe slump in the real economy even worse. As the financial crisis taught us, such a negative feedback loop could seriously impede price stability in the medium term. In order to avert this, monetary policy action was needed.
Such reforms are important to ultimately raise the euro area's production potential, improve the flexibility of the economy, and make the euro area more resilient to external shocks. In particular at the current juncture, when economic activity is subdued, taking measures to make the euro area a more attractive place to invest in can contribute substantially to fostering confidence.