Try to imagine what would have happened without the single currency. Probably, foreign exchange markets may have been subject to speculative attacks. Currency fluctuations may have aggravated both the financial crisis and real economic tensions – and do not forget the political turbulence implied by such currency tensions. The financial crisis confronts policymakers with a situation of uncertainty in a very profound sense.
Such Knightian uncertainty means that past experience is not of great value when deciding on appropriate policy measures. In such an environment, policy has to strike a difficult balance between short-term and long-term needs. More specifically, in the case of monetary policy, there is, on the one side, a need for resolute action to counter the consequences of the crisis.