As a result of those fragmented financial conditions, the transmission of the ECB’s monetary policy stance to interest rates was increasingly impaired. Moreover, banks in countries in which government finances were under strain faced restricted access to the money market and other sources of financing, given the interconnectedness between banks and sovereign states.
Had this been allowed to continue, these funding restrictions would probably have hampered growth in credit to households and non-financial corporations. This, combined with deleveraging needs, could have resulted in a “credit crunch” in several parts of the euro area, with negative consequences for the economy and price stability in the euro area.