Governments did not adopt sufficiently counter-cyclical policies to limit their own accumulation of debt or to counteract the accumulation of debt in the private sector.
In fact, because those economic booms were based on stronger domestic consumption and rising property prices, they led to improvements in cyclical fiscal balances as long as the boom went on, so that governments had few incentives to tighten fiscal policy before the bust set in.2 The accumulation of imbalances was exacerbated by institutional deficiencies The question naturally arises as to why this unsustainable degree of heterogeneity occurred in the euro area and not the United States.