When the crisis then erupted, people realised that Europe was not properly prepared for a situation like this. What was missing? The toolkit was insufficient to respond to critical developments. There was no common banking supervision, there were no institutions for the stabilisation or resolution of banks, and there were no macroprudential instruments. That increased the effects of the crisis.
Central banks have just one instrument to achieve price stability – the interest rate. It is difficult to counter a complex situation with this instrument alone. However, we have made good progress in stabilising the foundations of Monetary Union. The European elites did that too. But the people are clearly not happy with that.