However, current account imbalances were not monitored adequately by governments, and risks taken by financial market participants were insufficiently understood. Those years also saw, contrary to the provisions of the Treaty on European Union, little action by policymakers to induce flexibility and convergence or to correct public finances.
History will tell whether this was due to a benign global environment, to excessive faith in the endogenous effects of monetary union, or to badly designed institutions. The euro area became vulnerable to a breakdown of financial markets. Policy interventions temporarily provided risk-sharing arrangements for Europe, but ultimately, market-based risk-sharing mechanisms must be restored and strengthened.