Anti-clockwise doom loop – sovereigns infect banks  If it is the anti-clockwise doom loop we are looking to tackle, there are essentially two ways in which we can shield banks against distressed government finances. First, we can make government budgets inherently more stable, thereby reducing the likelihood of them getting into trouble.
Second, we can introduce regulatory requirements to ensure that banks are better protected in the rare event of a sovereign running into difficulties. 4.1  Preventing fiscal distress  Safeguarding the stability of government budgets is quite a challenge in the euro area on account of the specific structure of monetary union.