For example, the average capital formation as a share of GDP was only 13.0% for 2010-2015 compared to 18.2% in 2008 when the financial crisis started. As indicated, Government’s policy goals were targeted towards fiscal consolidation. Initial efforts to contain the central government deficit before 2013 were influenced by the favourable size of the foreign reserves buffer and on-going access to external capital markets.
The euro area still lacks genuinely integrated capital markets, which hinders the efficient allocation of European savings, private cross-border risk-sharing to smoothen consumption during idiosyncratic shocks and the use of the euro as an international currency. Recent legislative steps are commendable but do not measure up to the initial ambition of the capital markets union project.