“It is easy to argue today that if the monetary regime had sounded the alarm bell and triggered an adjustment in time, the crisis would have been either averted or, at the very least, mitigated.” Instead, “monetary oversight headquarters’ alarm systems and internal adjustment mechanisms were switched off”.
1995–2007 – Capital inflows from euro adoption were misallocated, leading to macroeconomic imbalances This is a story that begins in the mid-1990s, a period when we might argue the economy was broadly in (internal and external) balance. By then, the prospect of euro adoption translated into cheaper and more accessible financing, leading to strong credit expansion, and to a contraction in private savings.