Another issue of concern is the domestic interbank money market that has not operated normally in terms of daily transaction volume, in particular from the aspect of access by medium and small banks to this fund source. For your information, this issue regarding the interbank money market has been experienced by numerous countries and each country has responded differently.
In the spring of 2020, concerns about some countries’ perceived lack of fiscal space to deal with the pandemic led to a sharp divergence of financing conditions across euro area economies, thereby severely disrupting the transmission of monetary policy. I will argue that the vulnerability to such fragmentation risks will only disappear with fundamental changes to the euro area’s institutional architecture.