3.3  Some current problems  The current difficulties experienced in the euro area illustrate two further reasons why large fiscal imbalances are problematic for monetary policy. The financial crisis has led real economic activity to weaken severely.
At the same time, the rapid increase in public debts and the attendant difficulties in financing them have forced governments in a number of countries to tighten fiscal policy sharply to improve debt trajectories, further weakening economic activity.10 To offset the fall in demand, interest rates have been cut to almost zero in several countries.