Hence, it amplified the existing close link between risks stemming from a country’s public finances and the state of its banking system. These flaws were a major factor in the emergence of the sovereign debt crisis and that fact makes a good case for strengthening the institutional framework of the monetary union. I welcome the measures that have been initiated.
The reform of the Stability and Growth Pact and the agreement on the Fiscal Compact are major steps towards sounder budgetary policies. With the agreement on a European banking union, we have made further progress in one important specific area. A banking union can help to strengthen financial stability by loosening the nexus between banks and sovereigns.