We will always need strong banks in the euro area, as they play an essential role in situations where information cannot be standardised or where state verification is costly, for example lending to small- and medium-sized enterprises (SMEs).6 The main challenge in capital markets is to expand market access for firms across the euro area.
This implies a high degree of institutional coherence and co-ordination which is not easy to achieve – even unitary states like the U.S. have struggled to put in place such a comprehensive approach. In the euro area, it requires establishing a comprehensive set of rules and institutions to guide economic policies towards mutually beneficial outcomes.