Its population has to experience cuts, which are unprecedented in the post war European history. Nevertheless, an additional financial aid package was necessary including additional fiscal consolidation and privatization efforts.   In this context, Euro area Heads of State and Government reaffirmed their commitment to ensure the financial stability of the Euro area last Thursday.
But if the cross-border spillovers of reductions in the balance sheet and increases in the policy rate are not equivalent, the sequencing of policy rate and balance sheet normalization could have important implications for the exchange rate and external balance. 10  This simulation is shown in figure 2 in the appendix.