The Stability and Growth Pact provided rules to mitigate this situation but their implementation by the Council of Ministers often lacked traction and facilitated fiscal indiscipline. Second, macroeconomic imbalances often precede fiscal disequilibria. But the Treaty only provided for a vague coordination of economic policies which on top were not determinedly pushed by the Commission.
Third, Europe lacked a coherent approach to financial sector policies. Regulatory frameworks and financial policies remained insufficiently harmonised and centralised, neglecting the increasing level of financial integration in the euro area. In this respect, there was no level playing field for European banks and, in particular, there was no institutional framework to deal with (domestic and cross-border) systemic risks in the banking sector.