Therefore, precautions in terms of fiscal rules were put into place to safeguard sound public finances. They took the form of the no bail-out clause, the Stability and Growth Pact and the prohibition of monetary financing of government deficits for the reasons I have just mentioned. As it turned out, however, these precautions were not sufficient to prevent the crisis.
The introduction of the euro and the associated disappearance of exchange rate risks led to strong capital flows to countries which previously had high interest rates. Unfortunately, the capital inflows were not always put to productive use; banks and capital markets failed in many cases to allocate the money efficiently.